Gary Company leased a music studio from Prada company on a 6-year lease term at P250,000 annual rental payable in advance. Prada offered Gary the option to purchase the asset at a bargain price of P200,000 at the end of the lease contract. The estimated economic life of the asset is 10 years, and its estimated residual value is P5,000. the interest implicit in the lease is 12%. At the end of the lease term, Gary did not purchase the leased asset. (Round off the PV factor to four decimal places, then do not round off during the computation) How much loss on failure to exercise the bargain purchase option was reported by Gary?
Gary Company leased a music studio from Prada company on a 6-year lease term at P250,000 annual rental payable in advance. Prada offered Gary the option to purchase the asset at a bargain price of P200,000 at the end of the lease contract. The estimated economic life of the asset is 10 years, and its estimated residual value is P5,000. the interest implicit in the lease is 12%. At the end of the lease term, Gary did not purchase the leased asset. (Round off the PV factor to four decimal places, then do not round off during the computation) How much loss on failure to exercise the bargain purchase option was reported by Gary?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Gary Company leased a music studio from Prada company on a 6-year lease term at P250,000 annual rental payable in advance. Prada offered Gary the option to purchase the asset at a bargain price of P200,000 at the end of the lease contract. The estimated economic life of the asset is 10 years, and its estimated residual value is P5,000. the interest implicit in the lease is 12%. At the end of the lease term, Gary did not purchase the leased asset. (Round off the PV factor to four decimal places, then do not round off during the computation)
How much loss on failure to exercise the bargain purchase option was reported by Gary?
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