SunlandCo. bought equipment and immediately leased it to Riggs Company on May 1, 2021. At that time the collectibility of the lease payments wasnotprobable. The lease expires on May 1, 2022. Riggs could have bought the equipment fromSunlandfor $5850000instead of leasing it.Sunland's accounting records showed a book value for the equipment on May 1, 2021, of $4400000.Sunland's depreciation on the equipment in 2021 was $690000. During 2021, Riggs paid $1428000in rentals toSunlandfor the8-month period.Sunlandincurred maintenance and other related costs under the terms of the lease of $102000in 2021. After the lease with Riggs expires,Sunlandwill lease the equipment to another company for two years.

The income before income taxes derived bySunlandfrom this lease for the year ended December 31, 2021, should be

$636000.

$1428000.

$690000.

$1278000.

On January 2, 2021,Blossom, Inc. signed a10-year noncancelable lease for a heavy duty drill press. The lease stipulated annual payments of $170000starting at the beginning of the first year, with title passing toBlossomat the expiration of the lease.Blossomtreated this transaction as a finance lease. The drill press has an estimated useful life of15years, withnosalvage value.Blossomuses straight-line amortization for all of its plant assets. Aggregate lease payments were determined to have a present value of $1091002, based on implicit interest of9%.

In its 2021 income statement, what amount of amortization expense shouldBlossomreport from this lease transaction?

$89733

$109100

$170000

$72733

IvanhoeCo. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income$2450000

Estimated litigation expense

3450000

Extra depreciation for taxes

(5460000)Taxable income

$440000

The estimated litigation expense of $3450000will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $1820000in each of the next3years. The income tax rate is20% for all years.

Income taxes payable is

$602000.

$0.

$88000.

$402000.