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How much profit should larsen recognize on january

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Question - On January 1, 2011, Larsen Corporation sold a machine to Parson Corporation and simultaneously leased it back for ten years. The following information is available regarding the lease:

Estimated remaining useful life at December 31, 2010 10 years

Sales price $90,000

Carrying value at December 31, 2010 $52,500

Annual rental under leaseback $14,600

Interest rate implicit in the lease 10%

Present value of the lease rentals $ 89,711

($14,600 for 10 years at 10%)

How much profit should Larsen recognize on January 1, 2011, on the sale of the machine?

A) $0

B) $37,211

C) $90,000

D) $37,500

Reference no: EM131777917

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