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FAR2 Answers
FAR2 Answers
Requirement 1
Gross rentals (875,000x8)
Bargain purchase option
Gross investment
Gross investment
Total present value
Unearned interest income
Requirement 2
Sales – equal to total present value
Cost of goods sold
Gross profit
Requirement 3
2020
1-Jan Lease Receivable
Cost of Goods Sold
Sales
Unearned Interest Income
Inventory
Cash
Lease Recievable
2021
1-Jan Cash
Lease Receivable
31-Dec Unearned Interest Income
Interest Income
Requirement 4
2027
31-Dec Cash
Lease Receivable
Requirement 5
31-Dec Inventory
Loss on Finance
Lease Receivable
7000000
300000
7300000
5134850
139950
5274800
7300000
5274800
2025200
5274800
3100000
2174800
7300000
3100000
5274800
earned Interest Income 2025200
3100000
875000
se Recievable 875000
439980
erest Income 439980
875000
se Receivable 875000
396478
erest Income 396478
300000
se Receivable 300000
200000
100000
se Receivable 300000
PROBLEM 14-9
Requirement 1
Gross rentals (500,000x5) 2500000
Present value (500,000x3.60) 1800000
Unearned interest income 700000
Requirement 2
Sales 1800000
Cost of goods sold 1000000
Gross profit 800000
Requirement 3
2020
1-Jan Lease Receivable
Sales
Unearned Revenue
31-Dec Cash
Lease Receivable
Cash
Unearned Interest Income
Loss on Sale
Lease Receivable
500000
500000
181920
181920
71875
71875
1200000
230000
69795
1500000
1500000
-230205
1269795
1200000
69795
700000
216000
181920
71875 469795
230905
PROBLEM 14-13
1. C
2. C
3. B
1. A
2. A
3. B
Fair value of asset- sales price 12555000
Cost of asset 8,000,000
Profit on sale 4,555,000
4. C
PV of rentals equal to the fair value of asset 12555000
Payment of Jan. 1, 2020-all applicable to principal 1500000
Balance- January 1,2020 11055000