Sunland Company, a dealer in machinery and equipment, leased equipment to Sarasota, Inc., on July 1, 2025. The lease is appropriately accounted for as a sales-type lease by Sunland and as a finance lease by Sarasota. The lease is for a 10-year period (the useful life of the asset) expiring June 30, 2035. The first of 10 equal annual payments of $768000 was made on July 1, 2025. Sunland had purchased the equipment for $4950000 on January 1, 2025 and established a list selling price of $6900000 on the equipment. Assume that the present value at July 1, 2025, of the rent payments over the lease term discounted at 8% (the appropriate interest rate) was $5565612. Assuming Sarasota, uses straight-line depreciation, what is the amount of depreciation and interest expense that Sarasota should record for the year ended December 31, 2025? O $6900000 and $191904 O $278281 and $230000 O $6900000 and $153333 O $278281 and $191904
Sunland Company, a dealer in machinery and equipment, leased equipment to Sarasota, Inc., on July 1, 2025. The lease is appropriately accounted for as a sales-type lease by Sunland and as a finance lease by Sarasota. The lease is for a 10-year period (the useful life of the asset) expiring June 30, 2035. The first of 10 equal annual payments of $768000 was made on July 1, 2025. Sunland had purchased the equipment for $4950000 on January 1, 2025 and established a list selling price of $6900000 on the equipment. Assume that the present value at July 1, 2025, of the rent payments over the lease term discounted at 8% (the appropriate interest rate) was $5565612. Assuming Sarasota, uses straight-line depreciation, what is the amount of depreciation and interest expense that Sarasota should record for the year ended December 31, 2025? O $6900000 and $191904 O $278281 and $230000 O $6900000 and $153333 O $278281 and $191904
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sunland Company, a dealer in machinery and equipment, leased equipment to Sarasota, Inc., on July 1, 2025. The lease is appropriately
accounted for as a sales-type lease by Sunland and as a finance lease by Sarasota. The lease is for a 10-year period (the useful life of the
asset) expiring June 30, 2035. The first of 10 equal annual payments of $768000 was made on July 1, 2025. Sunland had purchased the
equipment for $4950000 on January 1, 2025 and established a list selling price of $6900000 on the equipment. Assume that the
present value at July 1, 2025, of the rent payments over the lease term discounted at 8% (the appropriate interest rate) was
$5565612.
Assuming Sarasota, uses straight-line depreciation, what is the amount of depreciation and interest expense that Sarasota should
record for the year ended December 31, 2025?
O $6900000 and $191904
O $278281 and $230000
O $6900000 and $153333
O $278281 and $191904
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