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What income or loss before income taxes

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1. On February 20, 2011, Hooke Inc., purchased a machine for $1,200,000 for the purpose of leasing it. The machine is expected to have a 10-year life, no residual value, and will be depreciated on the straight-line basis. The machine was leased to Sage Company on March 1, 2011, for a 4-year period at a monthly rental of $15,600. There is no provision for the renewal of the lease or purchase of the machine by the lessee at the expiration of the lease term.

Hooke paid $30,000 of commissions associated with negotiating the lease in February 2011:

(a) What expense should Sage Company record as a result of the facts above for the year ended December 31, 2011? Show supporting computations in good form

(b) What income or loss before income taxes should Hooke record as a result of the facts above for the year ended December 31, 2011? (Hint: Amortize commissions over the life of the lease.)(AICPA adapted) 

Reference no: EM131110363

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