Multiple Choice
Avionics Inc. ,a dealer in machinery and equipment,leased equipment to Benchmark Products on July 1,2014.The lease is appropriately accounted for as a sale by Avionics and as a purchase by Benchmark.The lease is for a ten-year period (the useful life of the asset) expiring June 30,2021.The first of ten equal annual payments of $250,000 was made on July 1,2014.Avionics had purchased the equipment for $1,337,500 on January 1,2014,and established a list selling price of $1,687,500 on the equipment.Assume that the present value at July 1,2014,of the rent payments over the lease term discounted at 12 percent (the appropriate interest rate) was $1,582,500.What is the amount of profit on the sale and the amount of interest income that Avionics should record for the year ended December 31,2014?
A) $245,000 and $94,950
B) $245,000 and $79,950
C) $350,000 and $79,950
D) $350,000 and $94,950
Correct Answer:
Verified
Correct Answer:
Verified
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