Question

Presented below are four independent situations. (Round answers to 0 decimal places, e.g. 125. If answer is 0, please enter 0. Do not leave any fields blank.)

(a) On December 31, 2017, Concord Inc. sold computer equipment to Daniell Co. and immediately leased it back for 10 years. The sales price of the equipment was $521,500, its carrying amount is $403,700, and its estimated remaining economic life is 12 years. Determine the amount of deferred revenue to be reported from the sale of the computer equipment on December 31, 2017.

The amount of deferred revenue to be reported

$enter the amount of deferred revenue to be reported rounded to 0 decimal places

(b) On December 31, 2017, Marigold Co. sold a machine to Cross Co. and simultaneously leased it back for one year. The sales price of the machine was $478,400, the carrying amount is $421,300, and it had an estimated remaining useful life of 14 years. The present value of the rental payments for the one year is $35,200. At December 31, 2017, how much should Marigold report as deferred revenue from the sale of the machine?

The amount of deferred revenue to be reported

$enter the amount of deferred revenue to be reported rounded to 0 decimal places

(c) On January 1, 2017, Swifty Corp. sold an airplane with an estimated useful life of 10 years. At the same time, Swifty leased back the plane for 10 years. The sales price of the airplane was $498,300, the carrying amount $379,500, and the annual rental $74,489. Swifty Corp. intends to depreciate the leased asset using the sum-of-the-years’-digits depreciation method. How much gain on the sale should be reported at the end of 2017 in the financial statements?

The gain on the sale should be reported

$enter the amount of the gain on the sale that should be reported rounded to 0 decimal places

(d) On January 1, 2017, Nash Co. sold equipment with an estimated useful life of 5 years. At the same time, Nash leased back the equipment for 2 years under a lease classified as an operating lease. The sales price (fair value) of the equipment was $214,000, the carrying amount is $299,700, the monthly rental under the lease is $6,000, and the present value of the rental payments is $116,677. For the year ended December 31, 2017, determine which items would be reported on its income statement for the sale-leaseback transaction.

$enter a dollar amount of gain or loss		select between Gain and Loss GainLoss
$enter a dollar amount		select an expense type

Answer 1

Solution 1. a) Amount of deferred revenue to be reported is defference Letween gale price and carrying Amount loe 521500 - 403700 = 117800 b) Amount of deferred revenue to be exeported iq zero 1. Considering Lease is only for one year, c) Gain on the sale to be reported in 2017 statement is : selling price - carrying Amount & 10/55 (sum of the years deget deporcciation) = ( 496300 – 379500) x 10155 = 21600

d) Rental Expense to be reported for year ended 31st December 2017 = 6000 x 12 = 12000 Loss on sale to be reported as equipment sold on fair value which is Less Less carrying amount = 214000 - 299700 = 85700