On January 1, 2011, Packard Corporation leased equipment to Hewlitt Company. The lease term is 8 years. The first payment of $450,000 was made on January 1, 2011. Remaining payments are made on December 31 each year, beginning with December 31, 2011. The equipment cost Packard Corporation $2,400,000. The present value of the minimum lease payments is $2,640,000. The lease is appropriately classified as a sales-type lease. Assuming the interest rate for this lease is 10%, what will be the balance reported as a liability by Hewlitt in the December 31, 2012, balance sheet?
A. $1,704,900
B. $1,509,000
C. $1,950,000
D. $1,959,000
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, what should be the deferred revenue from the sale of this machine ?