At the beginning of current year, Lessor Company leased a machine to Lessee Company. The machine had an original cost of Php6,000,000. The lease term was five years and the implicit rate on the lease was 15%. The lease is properly classified as a direct financing lease. The annual lease payments of Php1,730,541 are made each December 31. The machine reverts to Lessor at the end of the lease term, at which time the residual value of the machine will be Php400,000. The residual value is unguaranteed. The PV of 1 at 15% for 5 periods is .4972, and the PV of an ordinary annuity of 1 at 15% for 5 periods is 3.3522.

At the beginning of current year, Lessor Company leased a machine to Lessee Company. The machine had an original cost of Php6,000,000. The lease term was five years and the implicit rate on the lease was 15%. The lease is properly classified as a direct financing lease. The annual lease payments of Php1,730,541 are made each December 31. The machine reverts to Lessor at the end of the lease term, at which time the residual value of the machine will be Php400,000. The residual value is unguaranteed. The PV of 1 at 15% for 5 periods is .4972, and the PV of an ordinary annuity of 1 at 15% for 5 periods is 3.3522.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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