On january 1 2011 larsen corporation sold a machine to, Ask an Expert

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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

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9441390

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