Don Company acquires equipment under a non-cancelable lease at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Don Company is given the option to purchase the asset for P75,000 which is significantly lower than the expected market value of the asset at the end of five years. The appropriate interest rate is 12%. What is the capitalized cost of the asset and the first year's interest expense? (use four decimal places PV factor) A. P224,234 and P21,508 B. P224,234 and P26,908 C. P204,771 and P21,508 D. P204,771 and P19,173
Don Company acquires equipment under a non-cancelable lease at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Don Company is given the option to purchase the asset for P75,000 which is significantly lower than the expected market value of the asset at the end of five years. The appropriate interest rate is 12%. What is the capitalized cost of the asset and the first year's interest expense? (use four decimal places PV factor) A. P224,234 and P21,508 B. P224,234 and P26,908 C. P204,771 and P21,508 D. P204,771 and P19,173
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Don Company acquires equipment under a non-cancelable lease at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Don Company is given the option to purchase the asset for P75,000 which is significantly lower than the expected market value of the asset at the end of five years. The appropriate interest rate is 12%. What is the capitalized cost of the asset and the first year's interest expense? (use four decimal places PV factor)
A. P224,234 and P21,508
B. P224,234 and P26,908
C. P204,771 and P21,508
D. P204,771 and P19,173
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