What is the correct amount of profit to be reported


Peg Co. leased equipment from Howe Corp. on July 1, 2013, for an eight- year period expiring June 30, 2021. Equal payments under the lease are $ 600,000 and are due on July 1 of each year. The first payment was made on July 1, 2013. The rate of interest contemplated by Peg and Howe is 10%. The cash selling price of the equipment is $ 3,520,000, and the cost of the equipment on Howe's accounting records is $ 2,800,000. The lease is appropriately recorded as a sales- type lease. What is the amount of profit on the sale and interest revenue that Howe should record for the year ended December 31, 2013?

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Accounting Basics: What is the correct amount of profit to be reported
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