Presented below are four independent situations concerning Olympia Corp.
(a) On December 31, 2014, Olympia Corp. sold excavation equipment to Fifth Finance Company and immediately leased it back for 6 years. The sales price of the equipment was $400,000, its carrying amount is $250,000, and its estimated remaining economic life is 8 years. Determine the amount of deferred revenue to be reported from the sale of the computer equipment on December 31, 2014.
(b) On January 1, 2014, Olympia Corp. sold a tractor trailer with an estimated useful life of 15 years. At the same time, Olympia Corp. leased back the tractor trailer for 15 years. The sales price of the tractor trailer was $150,000, the carrying amount $35,000, and the annual rental $19,721.07. Olympia Corp. intends to depreciate the leased asset using the double-declining balance depreciation method. Discuss how the gain on the sale should be reported at the end of 2014 in the financial statements.
(c) On January 1, 2015, Olympia Corp. sold equipment with an estimated useful life of 6 years. At the same time, Olympia Corp. leased back the equipment for 4 years under a lease classified as an operating lease. The sales price (fair market value) of the equipment was $85,000 and the carrying amount is $120,000, the annual rental under the lease is $21,000, and the present value of the rental payments is $66,567. For the year ended December 31, 2014, determine which items would be reported on its income statement for the sale-leaseback transaction.
(d) On July 1, 2014, Olympia Corp. sold a portable office building to Three Brothers Leasing and simultaneously leased it back for two years. The sale price of the portable office building was $400,000, the carrying amount is $125,000, and it had an estimated remaining useful life of 20 years. The present value of the rental payments for the two years is $38,000. At December 31, 2014, how much should Olympia Corp. report as deferred revenue from the sale of the portable office building?