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Roman Company leased equipment from Koenig Company on July 1, 2015, for an eight-year period expiring June 30, 2023. Equal annual payments under the lease
Roman Company leased equipment from Koenig Company on July 1, 2015, for an eight-year period expiring June 30, 2023. Equal annual payments under the lease are S600,000 and are due on July 1 of each year. The first payment was made on July 1, 2015. The rate of interest contemplated by Roman and Koenig is 6%. The cash selling price of the equipment is $3,723,750 and the cost of the equipment on Koenig's accounting records was $3,300,000. Assuming that the lease is appropriately recorded as a sale foraccounting purposes by Koenig, what is the amount of profit on the sale and the interest income that Koenig would record for the year ended December 31, 2015? a. $0 and S0 b. $0 and S187,425 c. $423,750 and $187,425 d. $423,750 and $93,712.50
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