$2.$ Dustin Johnson is the sole proprietor of Johnson Enterprises. He is exploring the option of going public because his company is growing exponentially. The consulting firm that is reviewing his financials has questioned whether Johnson$$s CFO is technically competent enough to be the CFO of a publically traded company, as they believe he made several bad financial decisions. The two situations, which the firm brings to Dustin$$s attention, are as follows:

a$)$ Johnson purchased the building in which their corporate office is housed on $1/1/23$ for $$5,500,000.$ They put down $$900,000$ cash and had to borrow the remaining amount at $8\%$ over a $20-$year term. At the time of the purchase, they had the option to lease the building. The $20-$year lease would begin on $1/1/23$ and called for annual payments of $$350,000$ beginning on $12/31/23$ for the first $10$ years and payments of $$300,000$ beginning on $12/31/33$ for the remaining $10$ years of the lease. Dustin had the option to purchase the building for $$1$ on December $31,2041,$ at the end of the lease. Did the CFO make the right decision by purchasing the building? Why or why not? Show your work.

b$)$ This year, the company sold land for a non$-$interest$-$bearing note. The note calls for annual payments of $$30,000$ for $4$ years. The payments will begin one year from the date of the sale. An appropriate rate of interest for this type of note is $7\%.$ The land had an original purchase cost of $$90,000.$ The CFO told the accounting department to record the sale as follows:

Notes Receivable $$120,000$

Land $$90,000$

Gain on Sale of Land $$30,000$

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