Nelson Ltd Manufactures Specialised Machinery for Both Sale and Lease

Nelson Ltd manufactures specialised machinery for both sale and lease.On 1 July
2012,Nelson leased a machine to Poggi Ltd.The machine cost Nelson Ltd $195 000 to manufacture,and its fair value at the inception of the lease was $212 515.The interest rate implicit in the lease is 10%,which is in line with current market rates.Under the terms of the lease,Poggi Ltd has guaranteed $25 000 of the asset's expected residual value of $37 000 at the end of the 5-year lease term.The debit to the sales revenue account in Nelson's books is:

A) $187 548
B) $195 000
C) $205 063
D) $212 515

Correct Answer:

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