Northern Equipment
Northern Equipment leases cooling towers to Warmup Corporation. The equipment is not specialized and is delivered on January 1, 2019. The fair value of the equipment is $180,000. The cost of the equipment to Northern is $170,000 and the expected life of the testing equipment is 8 years. At the end of the useful life, it is expected that the equipment will have a residual value of $20,000, although the lessee guarantees only $15,000. Northern incurs initial direct costs of $20,000, which they elect to expense. The lease term for the equipment is 8 years, with the first payment due upon delivery, and seven subsequent annual payments beginning on December 31, 2019 and ending on December 31, 2025. Northern's implicit rate is 8% and they expect that collection of the $29,002 payments is probable. The lease is properly classified as a sales-type lease.
-What amount will be recorded for cost of goods sold?

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The Answer of Northern Equipment
Northern Equipment leases cooling towers to Warmup Corporation. The equipment is not specialized and is delivered on January 1, 2019. The fair value of the equipment is $180,000. The cost of the equipment to Northern is $170,000 and the expected life of the testing equipment is 8 years. At the end of the useful life, it is expected that the equipment will have a residual value of $20,000, although the lessee guarantees only $15,000. Northern incurs initial direct costs of $20,000, which they elect to expense. The lease term for the equipment is 8 years, with the first payment due upon delivery, and seven subsequent annual payments beginning on December 31, 2019 and ending on December 31, 2025. Northern's implicit rate is 8% and they expect that collection of the $29,002 payments is probable. The lease is properly classified as a sales-type lease.
-What amount will be recorded for cost of goods sold?

Northern Equipment Northern Equipment Leases Cooling Towers to Warmup Corporation. the Equipment