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JM Company leased equipment from KP Company on July 1, 2004, for an eight-year period expiring June 30, 2012. Equal annual payments under the lease are $200,000 and are due on July 1 of each year. The first payment was made on July 1, 2004. the rate of interest contemplated by JM and KP is 8%. The cash selling price of the equipment is $1,241,250 and the cost of the equipment on KP's accounting records was $1,100,000. Assuming that the lease is appropriately recorded as a capital lease by KP, what is the amount of profit on the sale and the interest income that KP would record for the year ended December 31, 2004?Question 1 options:
A. $0 and $0
B.$0 and $41,650
C. $141,250 and $41,650
D.$141,250 and $49,650
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