Thomas entered a four-year sales-type lease with a lessee. The lease is for equipment with a fair value of $40,000, a cost of $34,000, and a residual value of $7,000. The lease has an implicit rate of 6%. The present value factor of a single sum for four periods at 6% is .79209, and the present value factor of an ordinary annuity for four periods at 6% is 3.46511. What amount of gross profit will Thomas report if the lease has a(n) Guaranteed Residual Value Unguarantee

$6,000 for both guaranteed and unguaranteed residual value.

Explanation:

Gross Profit = Selling price - Cost of sales

Selling price = Fair value - Present value of residual value

= 40,000 - (7,000 * present value factor, 6%, 4 periods)

= 40,000 - (7,000 * 0.79209)

= $‭34,455.37‬

Cost of sales = Cost - Present value of residual value

=  34,000 - (7,000 * 0.79209)

= $‭28,455.37‬

Gross Profit = 34,455.37 - 28,455.37

= $6,000

hardwork and determination

answer; /// i believe the correct answer is first in, first out(fifo); //