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15. Legato Co. leased out to Staccato, Inc. a machine with a carrying amount of P593,685 and a remaining useful life of 5 years. Legato Co. incurred nitial direct costs of P25,000 in negotiating the lease. The machine reverts back to Legato Co. at the end of the lease, at which time the residual value of the machine is expected to be P10,000. The lease term is 4 years and annual rentals are due at the beginning of each year. If Legato Co. wants to eam a fair return on its net investment based on the current market rate of 12%, what amount of annual rental should Legato Co. charge Staccato Inc? O a. 180,000 O b. 170,000 O . 120,000 O d. 100,000

15. Legato Co. leased out to Staccato, Inc. a machine with a carrying amount of P593,685 and a remaining useful life of 5 years. Legato Co. incurred nitial direct costs of P25,000 in negotiating the lease. The machine reverts back to Legato Co. at the end of the lease, at which time the residual value of the machine is expected to be P10,000. The lease term is 4 years and annual rentals are due at the beginning of each year. If Legato Co. wants to eam a fair return on its net investment based on the current market rate of 12%, what amount of annual rental should Legato Co. charge Staccato Inc? O a. 180,000 O b. 170,000 O . 120,000 O d. 100,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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15. Legato Co. leased out to Staccato, Inc. a machine with a carrying amount of P593,685 and a remaining useful life of 5 years. Legato Co. incurred initial direct costs of P25,000 in negotiating the lease. The machine reverts back to Legato Co. at the end of the lease, at which time the residual value of the machine is expected to be P10,000. The lease term is 4 years and annual rentals are due at the beginning of each year. If Legato Co. wants to earn a fair return on its net investment based on the current market rate of 12%, what amount of annual rental should Legato Co. charge Staccato Inc? O a. 180,000 b. 170,000 c. 120,000 d. 100,000
Transcribed Image Text:15. Legato Co. leased out to Staccato, Inc. a machine with a carrying amount of P593,685 and a remaining useful life of 5 years. Legato Co. incurred initial direct costs of P25,000 in negotiating the lease. The machine reverts back to Legato Co. at the end of the lease, at which time the residual value of the machine is expected to be P10,000. The lease term is 4 years and annual rentals are due at the beginning of each year. If Legato Co. wants to earn a fair return on its net investment based on the current market rate of 12%, what amount of annual rental should Legato Co. charge Staccato Inc? O a. 180,000 b. 170,000 c. 120,000 d. 100,000
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