useful life of the asset) expiring June 30, 2031. The first of 10 equal annual payments of $748000 was made on July 1, 2021. Pharoah had purchased the equipment for $4850000 on January 1, 2021, and established a list selling price of $6800000 on the equipment. Assume that the present value at July 1, 2021, of the rent payments over the lease term discounted at 8% (the appropriate interest rate) was $5600000. What is the amount of profit on the sale and the amount of interest revenue that Pharoah should record for the year ended December 31, 2021? $750000 and $194080 $1200000 and $448000
Pharoah Company, a dealer in machinery and equipment, leased equipment to Sands, Inc., on July 1, 2021. The lease is appropriately accounted for as a sales-type lease by Pharoah and as a finance lease by Sands. The lease is for a 10-year period (the useful life of the asset) expiring June 30, 2031. The first of 10 equal annual payments of $748000 was made on July 1, 2021. Pharoah had purchased the equipment for $4850000 on January 1, 2021, and established a list selling price of $6800000 on the equipment. Assume that the present value at July 1, 2021, of the rent payments over the lease term discounted at 8% (the appropriate interest rate) was $5600000.
What is the amount of profit on the sale and the amount of interest revenue that Pharoah should record for the year ended December 31, 2021?
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$750000 and $194080 |
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$1200000 and $448000 |
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$750000 and $224000 |
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$0 and $164080 |
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