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  • Baook 1

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    Cece Castro
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    The document shows the accounting entries for a sale-leaseback transaction where a company sold machinery for $700,000 and leased it back for 4 years of payments of $150,000 per year. It calculates that the gain on the sale portion of the transaction is $26,973, which is recognized immediately.

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    The document shows the accounting entries for a sale-leaseback transaction where a company sold machinery for $700,000 and leased it back for 4 years of payments of $150,000 per year. It calculates that the gain on the sale portion of the transaction is $26,973, which is recognized immediately.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    11 views1 page

    Baook 1

    Uploaded by

    Cece Castro
    The document shows the accounting entries for a sale-leaseback transaction where a company sold machinery for $700,000 and leased it back for 4 years of payments of $150,000 per year. It calculates that the gain on the sale portion of the transaction is $26,973, which is recognized immediately.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    Cash (700,000-150,000) 550,000.

    00
    Right- -of Use Machinery 432,568.00
    Machinery 50,000.00
    Gain on Sale Leaseback 26,973.00
    Lease Liability (605,595 150,000) 455,595.00

    Net cash received (700,000 – 150,000) 550,000.00


    Present value of lease payments (150,000 x 4.0373) 605,595.00
    Lease liability after 1st – payment (605,595 150,000) 455,595.00
    Fair value of right transferred (700,000 605,595) 94,405.00
    Carrying amount of rights retained (605,595/700,000) x 500,00 432,568.00
    Carrying amount of right transferred (500,000 432,568) 67,432.00
    Total gain (700,000 – 500,000) 200,000.00
    Recognized gain:
    (94,405/700,000) x 200,000 26,973.00

    Gain may also be computed as:


    Selling price 700,000.00
    Fair value of asset retained 605,595.00
    Fair value of asset transferred 94,405.00
    Carrying amount of rights transferred 67,432.00
    Gain on sale leaseback 26,973.00

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