Garrison leased a special crane to Keillor that cost Garrison $40,000. The lease term was six years and the annual rentals were $10,000 per year, payable at the end of each year. The implicit interest rate was 10 percent. Garrison recognized a gross margin of

Question

Quizplus · Accepted Answer

The correct answer is A because the gross margin is the difference between the present value of the lease payments and the cost of the crane. The present value of the lease payments is $46,319, and the cost of the crane is $40,000. Therefore, the gross margin is $6,319.

Garrison Leased a Special Crane to Keillor That Cost Garrison