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 P4,800,000. Happy paid P150,000 in connection with negotiating and arranging the lease. The lease is appropriately accounted for as a dealer’s lease by Happy. The present value on January 1, 2021 of all rent payments over the lease term discounted at a 10% interest rate was P5,280,000. What is Happy Corporation’s net investment in the lease on December 31, 2021? A. P4,818,000 B. P4,380,000 C. P4,309,000 D. P3,918,000
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 P4,800,000. Happy paid P150,000 in connection with negotiating and arranging the lease. The lease is appropriately accounted for as a dealer’s lease by Happy. The present value on January 1, 2021 of all rent payments over the lease term discounted at a 10% interest rate was P5,280,000. What is Happy Corporation’s net investment in the lease on December 31, 2021? A. P4,818,000 B. P4,380,000 C. P4,309,000 D. P3,918,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 P4,800,000. Happy paid P150,000 in connection with negotiating and arranging the lease. The lease is appropriately accounted for as a dealer’s lease by Happy. The present value on January 1, 2021 of all rent payments over the lease term discounted at a 10% interest rate was P5,280,000.
What is Happy Corporation’s net investment in the lease on December 31, 2021?
A. P4,818,000
B. P4,380,000
C. P4,309,000
D. P3,918,000
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