Calculate the amount of expense incurred by riggs

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Question - Blossom Co. leased equipment to Riggs Company on May 1, 2021. At that time the collectibility of the lease payments was not probable. The lease expires on May 1, 2022. Riggs could have bought the equipment from Blossom for $4950000 instead of leasing it. Blossom's accounting records showed a book value for the equipment on May 1, 2021, of $4250000. Blossom's depreciation on the equipment in 2021 was $500000. During 2021, Riggs paid $948000 in rentals to Blossom for the 8-month period. Blossom incurred maintenance and other related costs under the terms of the lease of $99000 in 2021. After the lease with Riggs expires, Blossom will lease the equipment to another company for two years.

Ignoring income taxes, the amount of expense incurred by Riggs from this lease for the year ended December 31, 2021, should be

$500000.

$948000.

$401000.

$901000.

Reference no: EM132537422

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