11. Roman Company leased equipment from Koenig Company on January 1, 2018, for a
ID: 2553389 • Letter: 1
Question
11. Roman Company leased equipment from Koenig Company on January 1, 2018, for an eight-year period. Equal annual payments under the lease are $300,000 and are due on January 1 of each year. The first payment was made on January 1, 2018. The rate of interest contemplated by Roman and Koenig is 8%. The present value of the lease payments is $1,861,875 and the cost of the equipment on Koenig's accounting records was $1,650,000. Assuming that the lease is appropriately recorded as a sales-type for accounting purposes by Koenig, what would Koenig record for this lease arrangement for the year ended December 31,2018? a. $0 dealer's profit and S0 depreciation expense b. $0 dealer's profit and $232,734 depreciation expense c. $211,875 dealer's profit and S0 depreciation expense d. $211,875 dealer's profit and $232,734 depreciation expense.Explanation / Answer
Answer
the lease arrangement at the end of the year 31 december 2018
profit = lease payment - cost of equipment
= 1861875 - 1650000
= 211875 profit
the depreciation under the sales type
the koenig company who is lessor will not record depreciation expenses
the depreciation is 0
answer C ) 211875 dealer profit and 0 depreciation expense
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