Happy Corporation leased equipment to Great Company on January 1, 2021. The lease is for an eight-year period expiring on December 31, 2028. The first of eight equal annual payments of P900,000 was made on January 1, 2021, and subsequent payments will be made every January 1 thereafter. Happy Corporation had purchased the equipment on December 29, 2020, for P5,280,000, which is equal to its fair value. Happy paid P150,000 in connection with negotiating and arranging the lease. The lease is appropriately accounted for as a direct finance lease by Happy.  What is Happy Corporation’s net investment in the lease on January 1, 2021? A. P4,380,000 B. P5,280,000 C. P5,430,000 D. P4,530,000

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Happy Corporation leased equipment to Great Company on January 1, 2021. The lease is for an eight-year period expiring on December 31, 2028. The first of eight equal annual payments of P900,000 was made on January 1, 2021, and subsequent payments will be made every January 1 thereafter.

Happy Corporation had purchased the equipment on December 29, 2020, for P5,280,000, which is equal to its fair value. Happy paid P150,000 in connection with negotiating and arranging the lease. The lease is appropriately accounted for as a direct finance lease by Happy. 

What is Happy Corporation’s net investment in the lease on January 1, 2021?

A. P4,380,000
B. P5,280,000
C. P5,430,000
D. P4,530,000
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