Bitag is a dealer in machinery. On January 1, 2023, a machinery was leased to another entity with the following provisions: Annual rental payable at the end of each year 2,000,000 Lease term and useful life of machinery 5 years Cost of machinery 6,000,000 Residual value – guaranteed 1,000,000 Implicit interest rate 12% PV of an ordinary annuity of 1 for 5 periods at 12% 3.60 PV of 1 for 5 periods at 12% 0.57 There is no transfer of title nor bargain purchase option. What amount of cost of goods sold should be reported? 5,430,000 6,000,000 7,000,000 7,200,000
Bitag is a dealer in machinery. On January 1, 2023, a machinery was leased to
another entity with the following provisions:
Annual rental payable at the end of each year 2,000,000
Lease term and useful life of machinery 5 years
Cost of machinery 6,000,000
Residual value – guaranteed 1,000,000
Implicit interest rate 12%
PV of an ordinary annuity of 1 for 5 periods at 12% 3.60
PV of 1 for 5 periods at 12% 0.57
There is no transfer of title nor bargain purchase option.
What amount of cost of goods sold should be reported?
5,430,000
6,000,000
7,000,000
7,200,000
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