A company leases a piece of equipment to another company and appropriately records the 10 year lease as a sale. I have to determine the amount of profit to record in the first year - The lease payments are 500,000 for 10 years. The cost of the equipment is 2,675,000. The present value of a future annuity due (the lease payment is due at the first of the year) is 3,165,000. The list price for the equipment was 3,375,000. The lease starts July 1, 2004 - I'm looking for the amount of profit to record on December 31, 2004.

To determine the amount of profit to record on December 31, 2004, we need to calculate the revenue and expenses associated with the lease agreement.

1. Revenue:
The revenue from the lease is the present value of the lease payments. In this case, the present value of the lease payments is given as $3,165,000.

2. Expenses:
The expenses are the cost of the equipment and any other associated costs. Here, the cost of the equipment is given as $2,675,000.

To calculate the profit, we subtract the expenses from the revenue:
Profit = Revenue - Expenses

Profit = $3,165,000 - $2,675,000
Profit = $490,000

Therefore, the amount of profit to record on December 31, 2004, is $490,000.