What is the amount of profit on the sale

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Reference no: EM131971964

Problem

Roman Company leased equipment from Koenig Company on July 1, 2018, for an eight-year period expiring June 30, 2026. Equal annual payments under the lease are $800,000 and are due on July 1 of each year. The first payment was made on July 1, 2018. The rate of interest contemplated by Roman and Koenig is 8%. The cash selling price of the equipment is $4,965,000 and the cost of the equipment on Koenig's accounting records was $4,400,000. Assuming that Koenig appropriately records the lease as a sale for accounting purposes, what is the amount of profit on the sale and the interest income that Koenig would record for the year ended December 31, 2018?

Reference no: EM131971964

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