A manufacturer of shipping equipment decided to lease an equipment with a fair value of P2,500,000 on January 1, 2020 to a company needing the equipment but lacks sufficient funds to pay the entire list price. The transaction was recorded as a sale in the manufacturer's books and as a purchase by the buyer. The equipment had a carrying amount of P1,800,000 in the manufacturer's inventory at the time, and an estimated useful life of 6 years. The following information is presented regarding the lease: Year-end annual lease payments P700,000 Implicit rate 10% Lease term 5 years USE PV FACTORS ROUNDED TO 4 DECIMALS. ROUND FINAL ANSWERS TO NEAREST PESO.
A manufacturer of shipping equipment decided to lease an equipment with a fair value of P2,500,000 on January 1, 2020 to a company needing the equipment but lacks sufficient funds to pay the entire list price. The transaction was recorded as a sale in the manufacturer's books and as a purchase by the buyer. The equipment had a carrying amount of P1,800,000 in the manufacturer's inventory at the time, and an estimated useful life of 6 years. The following information is presented regarding the lease: Year-end annual lease payments P700,000 Implicit rate 10% Lease term 5 years USE PV FACTORS ROUNDED TO 4 DECIMALS. ROUND FINAL ANSWERS TO NEAREST PESO.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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![A manufacturer of shipping equipment decided to lease an equipment with a fair value of P2,500,000 on January 1,
2020 to a company needing the equipment but lacks sufficient funds to pay the entire list price. The transaction
was recorded as a sale in the manufacturer's books and as a purchase by the buyer.
The equipment had a carrying amount of P1,800,000 in the manufacturer's inventory at the time, and an estimated
useful life of 6 years.
The following information is presented regarding the lease:
Year-end annual lease payments
P700,000
Implicit rate
10%
Lease term
5 years
USE PV FACTORS ROUNDED TO 4 DECIMALS.
ROUND FINAL ANSWERS TO NEAREST PESO.
Determine total income recognized by the manufacturer in 2020 related to the sale and lease.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd20ac169-9ee2-457e-a629-ea18d1da1a49%2Ff01ba5db-2099-4a61-8cfd-aba34e46c9e7%2Fe6kgfl_processed.png&w=3840&q=75)
Transcribed Image Text:A manufacturer of shipping equipment decided to lease an equipment with a fair value of P2,500,000 on January 1,
2020 to a company needing the equipment but lacks sufficient funds to pay the entire list price. The transaction
was recorded as a sale in the manufacturer's books and as a purchase by the buyer.
The equipment had a carrying amount of P1,800,000 in the manufacturer's inventory at the time, and an estimated
useful life of 6 years.
The following information is presented regarding the lease:
Year-end annual lease payments
P700,000
Implicit rate
10%
Lease term
5 years
USE PV FACTORS ROUNDED TO 4 DECIMALS.
ROUND FINAL ANSWERS TO NEAREST PESO.
Determine total income recognized by the manufacturer in 2020 related to the sale and lease.
![On January 1, 2020, A Company sold a building to B Company with a carrying amount of P4,200,000 for
P5,500,000 and immediately leased it back. The building had a fair value of P4,700,000 at the date of sale, and had
a remaining useful life of 10 years.
Additional information on the lease is as follows:
Lease term
5 years
P500,000
Annuity made in advance
10%
Implicit rate
USE PV FACTORS ROUNDED TO 4 DECIMALS.
ROUND FINAL ANSWERS TO NEAREST PESO.
Determine total rent income recognized by B Company in 2020.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd20ac169-9ee2-457e-a629-ea18d1da1a49%2Ff01ba5db-2099-4a61-8cfd-aba34e46c9e7%2Fuj7lhbs_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2020, A Company sold a building to B Company with a carrying amount of P4,200,000 for
P5,500,000 and immediately leased it back. The building had a fair value of P4,700,000 at the date of sale, and had
a remaining useful life of 10 years.
Additional information on the lease is as follows:
Lease term
5 years
P500,000
Annuity made in advance
10%
Implicit rate
USE PV FACTORS ROUNDED TO 4 DECIMALS.
ROUND FINAL ANSWERS TO NEAREST PESO.
Determine total rent income recognized by B Company in 2020.
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