Question
Sunland Company leased equipment from Koenig Company on July 1, 2021, for an 8-year period expiring June 30, 2029. Equal annual payments under the lease
Sunland Company leased equipment from Koenig Company on July 1, 2021, for an 8-year period expiring June 30, 2029. Equal annual payments under the lease are $794000 and are due on July 1 of each year. The first payment was made on July 1, 2021. The rate of interest contemplated by Sunland and Koenig is 9%. The lease receivable before the first payment is $4790000 and the cost of the equipment on Koenigs accounting records was $4340000. Assuming that the lease is appropriately recorded as a sale for accounting 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, 2021?
$450000 and $215550 |
| $0 and $0 |
| $0 and $179820 |
| $450000 and $179820 |
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