[calicpa]

Why is A correct?

On January 1, 2005, Hooks Oil Co. sold equipment with a carrying amount of $100,000 and a remaining useful life of 10 years to Maco Drilling for $150,000.

Hooks immediately leased the equipment back under a 10-year capital lease with a present value of $150,000 and will depreciate the equipment using the straight-line method. Hooks made the first annual lease payment of $24,412 in December 2005.

In Hooks’ December 31, 2005 balance sheet, the unearned gain on equipment sale should be

A. $50,000.

B. $45,000.

C. $25,588.

D. $0.

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[Anonymous]

fair value = selling price = 150k

150lk * .9 = 135k

[Author]

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