1. What amount should be reported as total financial revenue over the lease term? a. 450,000 b. 225,000 c. 500,000 d. 250,000 2. What amount should be reported as interest income for the current year?
1. What amount should be reported as total financial revenue over the lease term? a. 450,000 b. 225,000 c. 500,000 d. 250,000 2. What amount should be reported as interest income for the current year?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2022, Alpha Company leased an equipment to
another entity under a direct financing lease. The cost of the
equipment to Alpha Company was P1,550,000.
The lease payments stipulated in the lease are P500,000 per
year payable at the end of each year over a 4-year period of the
lease. The title to the equipment remains in the hands of
Alpha Company at the end of the lease term, although only
nominal residual value is expected at that time.
The implicit interest rate in the lease is 11%. The fiscal year
of Alpha Company ends December 31.
1. What amount should be reported as total financial
revenue over the lease term?
a. 450,000
b. 225,000
C. 500,000
d. 250,000
2. What amount should be reported as interest income for
the current year?
a. 134,255
b. 170,500
c. 155,000
d. 220,000
3. What is the carrying amount of the lease receivable on
December 31, 2022?
a. 1,220,500
b. 1,500,000
875,755
750,000
C.
d.
4. What is the carrying amount of the current portion of
the lease receivable on December 31, 2022?
a. 500,000
b. 365,745
c. 854,755
d. 354,755
5. Prepare journal entries for 2022 and 2023.
421
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