Reference no: EM132736832
Portas Co. leased equipment from Ingalls Co. Assume the lease payments were made on the basis that the residual value was guaranteed by Portas. At the end of the lease term, before the Portas transfers the asset to the lessor, the leased asset and obligation accounts have the following balances:
Leased equipment under capital lease $1,400,000
Less accumulated depreciation--capital lease 1,344,000
$ 56,000
Interest payable $ 5,320
Obligations under capital leases 50,680
$56,000
Problem 1: If, at the end of the lease, the fair market value of the residual value is $30,800, what gain or loss should be recorded?
Option 1: $22,680 gain
Option 2: $30,800 gain
Option 3: $24,920 loss
Option 4: $25,200 loss
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