- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 8. Topics in Long-Term Liabilities and Equity
- Subject 4. Accounting and Reporting by the Lessor
CFA Practice Question
On December 31, 2014, Rosen Corp. sold a machine to Carter and simultaneously leased it back for one year. Pertinent information (on this date) follows:
Carrying amount: $330,000
Present value of reasonable lease rentals ($3,000 for 12 months @ 12%): $34,000
Estimated remaining useful life: 12 years
B. $30,000
C. $0
Sales price: $360,000
Carrying amount: $330,000
Present value of reasonable lease rentals ($3,000 for 12 months @ 12%): $34,000
Estimated remaining useful life: 12 years
In Rosen's December 31, 2014 balance sheet, the profit from the sale of this machine should be ______.
A. $34,000
B. $30,000
C. $0
Correct Answer: B
The profit on the sale would be the difference between the sales price and the carrying amount. $360,000 - $330,000 = $30,000
User Contributed Comments 3
| User | Comment |
|---|---|
| endlessyy | Then what is that $4000 is? unearned interest? |
| Jurrens | it only asks about the sale, not the leasing-back aspect |
| jrojasut09 | the PV of the lease payments become a liability |