Becker Corporation sells farm machinery on the installment plan. On July 1, 2010, Devers entered into an installment-sale contract with Valente Inc. for a 8-year period. Equal annual payments under the installment sale are $100,000 and are due on July 1. The first payment was made on July 1, 2010.
Additional information
The amount that would be realized on an outright sale of similar farm machinery is $586,842.
The cost of the farm machinery sold to Valente Inc. is $425,000.
The finance charges relating to the installment period are based on a stated interest rate of 10%, which is appropriate.
Circumstances are such that the collection of the installments due under the contract is reasonably assured.
What income or loss before income taxes should Devers record for the year ended December 31, 2010, as a result of the transaction above?
Additional information
The amount that would be realized on an outright sale of similar farm machinery is $586,842.
The cost of the farm machinery sold to Valente Inc. is $425,000.
The finance charges relating to the installment period are based on a stated interest rate of 10%, which is appropriate.
Circumstances are such that the collection of the installments due under the contract is reasonably assured.
What income or loss before income taxes should Devers record for the year ended December 31, 2010, as a result of the transaction above?