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A Company leased equipment to B Company on July 1, 2022. A Company recorded the lease...

A Company leased equipment to B Company on July 1, 2022. A Company recorded the lease as a sales-type lease at $760,000, the present value of lease payments discounted at 6%. The lease called for 11 annual lease payments of $90,000 due each July 1. The first payment was received on July 1, 2022. A Company had manufactured the equipment at a cost of $692,000. The total increase in earnings (pretax) on A Company's December 31, 2022, income statement would be:

Group of answer choices

$40,200

$88,100

$90,700

$108,200

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Answer #1

Total increase in pretax earnings will be $ 40200 i.e. (760000-90000)*6%

Because the leasing part is a deferred sale transaction. Actual income is the interest recieved.

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