Answer:
$2,400,000
Explanation:
Always remember that in the case of a sales type lease, the lessor at the inception of the sales type lease would recognize sale of equipment at a price of present value of the lease payments which is $2,800,000 and cost of goods sold will be recorded at cost of equipment which is $2,400,000.
Case 1: If the equipment was an inventory then the double entry would be as under:
Recording of Sales:
Dr Lease Asset $2,800,000
Cr Sale of Inventory $2,800,000
Recording of inventory out:
Dr Cost of Goods Sold $2,400,000
Cr Inventory Account $2,400,000
Case 2: If the equipment was fixed asset then the double entry would be as under:
Recording of Sales:
Dr Lease Asset $2,800,000
Cr Sale of Fixed Asset $2,800,000
Recording of equipment handing over to customer:
Dr Cost of Goods Sold $2,400,000
Cr Equipment Account $2,400,000
In both of the cases the cost of goods sold will be $2,400,000.
