Homework Help is Here – Start Your Trial Now!
Business
Accounting
Cost of equipment P1,200,000 Useful life of equipment 5 years Lease term 4 years Annual rent payable at the end of each year Interest rate implicit in the lease r400,000 10% Residual value P80,000

Cost of equipment P1,200,000 Useful life of equipment 5 years Lease term 4 years Annual rent payable at the end of each year Interest rate implicit in the lease r400,000 10% Residual value P80,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

7

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?
Expert Solution
steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Market Efficiency
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS