ABC Company is engaged in leasing equipment. An equipment was delivered to a lessee on December 31,2019 under a direct financing lease with the following terms and conditions: Cost of the equipment P 5,680,000 Residual value (unguaranteed) 300,000 Useful life and lease term 8 years Implicit interest rate 12% Present value of an annuity due of 1 at 12% for 8 years 5.56 Present value of 1 at 12% for 8 years 0.40 The annual rental is P 1,000,000 payable every December 31. The first payment is made on December 31,2019. The equipment will revert to the lessor upon lease expiration. How much is the interest revenue for the year ended December 31,2020?
ABC Company is engaged in leasing equipment. An equipment was delivered to a lessee on December 31,2019 under a direct financing lease with the following terms and conditions: Cost of the equipment P 5,680,000 Residual value (unguaranteed) 300,000 Useful life and lease term 8 years Implicit interest rate 12% Present value of an annuity due of 1 at 12% for 8 years 5.56 Present value of 1 at 12% for 8 years 0.40 The annual rental is P 1,000,000 payable every December 31. The first payment is made on December 31,2019. The equipment will revert to the lessor upon lease expiration. How much is the interest revenue for the year ended December 31,2020?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ABC Company is engaged in leasing equipment. An equipment was delivered to a lessee on December 31,2019 under a direct financing lease with the following terms and conditions:
Cost of the equipment P 5,680,000
Residual value (unguaranteed) 300,000
Useful life and lease term 8 years
Implicit interest rate 12%
Present value of an annuity due of 1 at 12% for 8 years 5.56
Present value of 1 at 12% for 8 years 0.40
The annual rental is P 1,000,000 payable every December 31. The first payment is made on December 31,2019. The equipment will revert to the lessor upon lease expiration.
How much is the interest revenue for the year ended December 31,2020?
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