Determine what is the amount of profit on the sale

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Popeye Company leased equipment to the Polly Company on July 1, 2017, for a ten-year period expiring June 30, 2027. Equal annual payments under the lease are 80,000 and are due on July 1 of each year. The first payment was made on July 1, 2017. The rate of interest contemplated by Popeye and Polly is 9%. The cash selling price of the equipment is 560,000 and the cost of the equipment on Popeye's accounting records was 496,000.

Problem 1: Assuming that the lease is appropriately recorded as a sale for accounting purposes by Popeye, what is the amount of profit on the sale and the interest revenue that Popeye would record for the year ended December 31, 2017?

Select one:

a. 64,000 and 21,600

b. 64,000 and 43,200

c. 64,000 and 50,400

d. 0 and 0

Reference no: EM132623646

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