Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
58
Transcribed Image Text:ABC Company leased equipment to XYZ Company on July 1, 2020, for a ten-year period
expiring June 30, 2030. Equal annual payments under the lease are P80,000 and are due on
July 1 of each year. The first payment was made on July 1, 2020. The rate of interest implicit in
the lease is 9%. The cash selling price of the equipment is P560,000 and the cost of the
equipment on ABC's accounting records was P496,000.
Assuming that the lease is appropriately recorded as a sale for accounting purposes by
ABC, what is the amount of profit on the sale and the interest revenue that ABC would
record for the year ended December 31, 2020? * G
P64,000 and P50,400
O P64,000 and P43,200
O P64,000 and P21,600
O PO and PO
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