a. Gross investment in the lease on January 1, 20x1. b. Net investment in the lease on January 1, 20x1. Unearned interest income on January 1, 20xl.
a. Gross investment in the lease on January 1, 20x1. b. Net investment in the lease on January 1, 20x1. Unearned interest income on January 1, 20xl.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![On January 1, 20x1, NUPTIAL OF MARRIAGE Financing Co. leased equipment to WEDDING, Inc.
Information on the lease is shown below.
Cost of equipment
Useful life of equipment
Lease term
Annual rental payable at the end of each year
P600,000
5 years
4 years
220,000
Additional information:
The annual lease payment includes P18,098 pertaining to insurance taken by NUPTIAL on the equipment
leased. Direct costs incurred by NUPTIAL in negotiating the lease amounted to P40,000. The implicit
rate, after adjustment for the foregoing items, is 10%.
Requirements: Compute for the following:
a. Gross investment in the lease on January 1, 20x1.
b. Net investment in the lease on January 1, 20x1.
c. Unearned interest income on January 1, 20x1.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F419c18f2-4c04-4d05-8502-3d5b76d73c4c%2F759b0c64-b9b7-4229-9e25-ed306f502a55%2Flb1n9v9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On January 1, 20x1, NUPTIAL OF MARRIAGE Financing Co. leased equipment to WEDDING, Inc.
Information on the lease is shown below.
Cost of equipment
Useful life of equipment
Lease term
Annual rental payable at the end of each year
P600,000
5 years
4 years
220,000
Additional information:
The annual lease payment includes P18,098 pertaining to insurance taken by NUPTIAL on the equipment
leased. Direct costs incurred by NUPTIAL in negotiating the lease amounted to P40,000. The implicit
rate, after adjustment for the foregoing items, is 10%.
Requirements: Compute for the following:
a. Gross investment in the lease on January 1, 20x1.
b. Net investment in the lease on January 1, 20x1.
c. Unearned interest income on January 1, 20x1.
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