Kennon Technologies, a dealer of machinery and equipment, leased equipment to Marcos Co. on July 1, 2017. This lease was accounted for as a sale by Kennon and as a purchase by Marcos.The lease is for a ten-year period equal to the useful life of the asset ending June 30, 2027, with payment of ₱250,000 beginning July 1, 2017.Kennon purchased the equipment for ₱1,337,500 on January 1, 2017 and established a list selling price of ₱1,687,500 on the equipment. The present value on July 1, 2017 of the rent payments over the lease term discounted at 12% is ₱1,582,500.5. What amount of profit on sale should be recognized for the year ended December 31, 2017?
Kennon Technologies, a dealer of machinery and equipment, leased equipment to Marcos Co. on July 1, 2017. This lease was accounted for as a sale by Kennon and as a purchase by Marcos.The lease is for a ten-year period equal to the useful life of the asset ending June 30, 2027, with payment of ₱250,000 beginning July 1, 2017.Kennon purchased the equipment for ₱1,337,500 on January 1, 2017 and established a list selling price of ₱1,687,500 on the equipment. The present value on July 1, 2017 of the rent payments over the lease term discounted at 12% is ₱1,582,500.5. What amount of profit on sale should be recognized for the year ended December 31, 2017?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 9MC
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Kennon Technologies, a dealer of machinery and equipment, leased equipment to Marcos Co. on July 1, 2017. This lease was accounted for as a sale by Kennon and as a purchase by Marcos.The lease is for a ten-year period equal to the useful life of the asset ending June 30, 2027, with payment of ₱250,000 beginning July 1, 2017.Kennon purchased the equipment for ₱1,337,500 on January 1, 2017 and established a list selling price of ₱1,687,500 on the equipment. The present value on July 1, 2017 of the rent payments over the lease term discounted at 12% is ₱1,582,500.5. What amount of profit on sale should be recognized for the year ended December 31, 2017?
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