On December 31, 2011, B Corp. sold a machine to Royal and simultaneously leased

Question

On December 31, 2011, B Corp. sold a machine to Royal and simultaneously leased it back for one year. Pertinent information at this date follows:

Sales price

$720,000

Carrying amount

660,000

Present value of lease rentals

68,200

($6,000 for 12 months at 12%

Estimated remaining useful life                         12 years

In B's December 31, 2011, balance sheet, the deferred revenue from the sale of this machine should be

A. $68,200.

B. $0.

C. $60,000.

D. $8,200.

Sales price

$720,000

Carrying amount

660,000

Present value of lease rentals

68,200

Explanation / Answer

Answer :- Option B). $ 0.

Explanation :- Deferred revenue from the sale of machine in the given question should be $ 0.

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