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? *
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? *
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![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? *](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fea7239bf-d1ad-41d2-bb34-c6cf91a0da71%2F98649ac0-fbeb-4e58-abc5-cdf4d81fc6e0%2Fbojjvsm_processed.png&w=3840&q=75)
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? *
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