Cost of equipment P1,200,000 5 years 4 years Useful life of equipment Lease term Annual rent payable at the end of each year P400,000 Interest rate implicit in the lease 10% Residual value r80,000 uipment will revert back to POLTROON at the end of the lease term. The lease is classifie ase. How much is the gross investment in the lease on January 1, 20x1 assuming the residu.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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n January 1, 20x1, POLTROON Co. leased a piece of equipment to COWARD, Inc. Information on
the lease is as follows:
Cost of equipment
P1,200,000
5 years
4 years
Useful life of equipment
Lease term
Annual rent payable at the end of each year
Interest rate implicit in the lease
P400,000
10%
Residual value
P80,000
The equipment will revert back to POLTROON at the end of the lease term. The lease is classified as sales
type lease.
a. How much is the gross investment in the lease on January 1, 20x1 assuming the residual value is
guaranteed?
b. How much are the sales and cost of sales if the residual value is unguaranteed?
Transcribed Image Text:n January 1, 20x1, POLTROON Co. leased a piece of equipment to COWARD, Inc. Information on the lease is as follows: Cost of equipment P1,200,000 5 years 4 years Useful life of equipment Lease term Annual rent payable at the end of each year Interest rate implicit in the lease P400,000 10% Residual value P80,000 The equipment will revert back to POLTROON at the end of the lease term. The lease is classified as sales type lease. a. How much is the gross investment in the lease on January 1, 20x1 assuming the residual value is guaranteed? b. How much are the sales and cost of sales if the residual value is unguaranteed?
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