On June 30, 2018, Sheridan Co. sold equipment to an unaffiliated company for $2250000. The equipment...
On June 30, 2018, Sheridan Co. sold equipment to an unaffiliated
company for $2250000. The equipment had a book value of $1205000
and a remaining useful life of 10 years. That same day, Sheridan
leased back the equipment at $12500 per month for 5 years with no
option to renew the lease or repurchase the equipment. Sheridan’s
rent expense for this equipment for the year ended December 31,
2018, should be
A, B, C, or D
| $125000. |
| $300000. |
| $100000. |
| $75000. |
Homework Answers
Solution
Sheridan's rent expense for the year ended December 2018 will be:
July 2018 to December 2018 which means in 2018 expense of 6 months will arise.
Monthly rent expense= $12500
So the interest expense to be recorded for these 6 months will be:
$12500× 6 months = $75000.
Thus the correct option is option (d), $75000.
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