INTEREST EXPENSE FOR 2020?
1. On Jan. 1, 2020, A+ Company entered into an 8 year lease of floor building with useful life of 15 years with the follwing terms:
Annual rental for the first 3 years payable at the end of each year 300, 000
Annual rental for the next 5 years payable at the end of each year 400, 000
Implicit interest rate 10%
PV of an ordinary annuity of 1 at 10% for three periods 2.49
PV of an ordinary annuity of 1 at 10% for five periods 3.79
PV of at 10% for three periods 0.75
The lease provides for neither a transfer of title to the lessee nor a purchase option. WHAT IS THE INTEREST EXPENSE FOR 2020?
2. Dexter Company is a car dealer. On jan. 1, 2021, the entity entered into a finance lease with a custometer would pay 200, 000 on jan. 1 each year for 5 years, commencing in 2020. the cost of the car is 600, 000 amd the cash selling price was 750, ooo. The entity paid paid legal fees of 20, 000 to a law firm in connection with the arrangemet of the lease.
*What amount of gross profit on sale should be recognized for the year ended dec. 31, 2021?
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