Exhibit 20-3 On January 1, 2014, Quinn Company enters into a five-year sales-type lease with Andy Company. The lease requires Andy to make five annual payments at the beginning of the year, with the first payment due January 1, 2014. The lease includes a bargain purchase price of $10,000. Quinn requires a 10% rate of return. The cost to Quinn of the property is $100,000, and it has a fair value of $150,000. Present value factors for a 10% interest rate are as follows:
-Refer to Exhibit 20-3. The sales revenue to be recognized by Quinn on January 1, 2014, is

Question

Exhibit 20-3 On January 1, 2014, Quinn Company enters into a five-year sales-type lease with Andy Company. The lease requires Andy to make five annual payments at the beginning of the year, with the first payment due January 1, 2014. The lease includes a bargain purchase price of $10,000. Quinn requires a 10% rate of return. The cost to Quinn of the property is $100,000, and it has a fair value of $150,000. Present value factors for a 10% interest rate are as follows: 
-Refer to Exhibit 20-3. The sales revenue to be recognized by Quinn on January 1, 2014, is

Quizplus · Accepted Answer

To determine the sales revenue to be recognized by Quinn, we need to calculate the present value of the lease payments and the bargain purchase price. Using the present value factor of 3.791, we can calculate the present value of the lease payments to be $47,382 ($12,500 x 3.791). Adding this to the present value of the bargain purchase price of $6,710 ($10,000 x 0.671), we get a total present value of $54,092. Since the cost of the property is $100,000, the gross profit for Quinn is $45,908 ($100,000 - $54,092). Therefore, the sales revenue to be recognized by Quinn on January 1, 2014, is $150,000 ($100,000 cost + $45,908 gross profit).

Exhibit 20-3 on January 1, 2014, Quinn Company Enters into a Five-Year