1. How much profit, inclusive of interest revenue, should Black Company report from this lease for the year ended December 31, 2021? (round off the final answer to the nearest peso)
On March 1, 2021, Black Company leased equipment White Company for a four-year period ending February 28, 2025. The equipment cost Black Company P310,000 and has an expected useful life of five years. Annual payments are P109,047, which includes P10,000 executory costs. The equipment's fair value is P400,000. The lessee guarantees the residual value of P80,000. Lease payment is due every March 1 and White Company made the first payment on March 1, 2021. The lessor's implicit interest rate is 10%.
Black Company incurred P16,000 costs to consummate the lease contract.
The present value of 1 discounted at 10% for 4 periods is 0.68301. The present value of an annuity due of 1 for 4 periods discounted at 10% is 3.48685. The present value of an ordinary annuity of 1 at 10% for 4 periods is 3.16987.
1. How much profit, inclusive of interest revenue, should Black Company report from this lease for the year ended December 31, 2021? (round off the final answer to the nearest peso)
Step by step
Solved in 3 steps with 3 images
