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Calculate the Gross investment for Apple Tree Co

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Reference no: EM132849752

Question - Apple Tree Co. is a farming equipment dealer who reports using IFRS. It plans to lease a piece of farming equipment to Seed Inc. and wants to earn a profit on the equipment as well as earn interest. The details of the lease are as follows:

It will be a 5 year lease and will have annual rental payments due at the beginning of the year.

The rate of return Apple Tree Co. wants to earn on the equipment is 7%.

The estimated residual value (guaranteed) is $10,000 (the present value of which is $7,130).

The annual lease payments are $55,359 (the present value of which is $242,870); and

The leased equipment has a $200,000 cost to the dealer, Apple Tree Co.

Required - Calculate the following for Apple Tree Co:

a. Gross investment

b. Unearned interest income

c. Sales revenue

d. Cost of goods sold

e. Gross profit

Reference no: EM132849752

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