Megan Appliances leased an office space from Cindy Real Estate, Inc on July 1, 2020. The lease contract is 8 years. The rental payment of P600,000 is payable in advance, every July 1 starting July 1, 2020. Implicit rate is 10%. Cindy Real Estate is a dealer of office space and makes a profit through its leasing business. The carrying value of the office space on Cindy’s records is 2,800,000. Megan guaranteed the residual value of P100,000 upon its return of the asset to Cindy. Relevant PV factors are shown below: · PV of annuity due for 8 periods at 10%: 5.87 · PV of ordinary annuity for 8 periods at 10%: 5.33 · PV of 1 for 8 periods at 10%: 0.47 How much is the dealer’s profit to be recognized by Cindy on commencement date? a. 769,000 b. 2,753,000 c. 3,569,000 d. None – this is a direct finance lease
Megan Appliances leased an office space from Cindy Real Estate, Inc on July 1, 2020. The lease contract is 8 years. The rental payment of P600,000 is payable in advance, every July 1 starting July 1, 2020. Implicit rate is 10%. Cindy Real Estate is a dealer of office space and makes a profit through its leasing business. The carrying value of the office space on Cindy’s records is 2,800,000. Megan guaranteed the residual value of P100,000 upon its return of the asset to Cindy. Relevant PV factors are shown below: · PV of annuity due for 8 periods at 10%: 5.87 · PV of ordinary annuity for 8 periods at 10%: 5.33 · PV of 1 for 8 periods at 10%: 0.47 How much is the dealer’s profit to be recognized by Cindy on commencement date? a. 769,000 b. 2,753,000 c. 3,569,000 d. None – this is a direct finance lease
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Megan Appliances leased an office space from Cindy Real Estate, Inc on July 1, 2020. The lease contract is 8 years. The rental payment of P600,000 is payable in advance, every July 1 starting July 1, 2020. Implicit rate is 10%. Cindy Real Estate is a dealer of office space and makes a profit through its leasing business. The carrying value of the office space on Cindy’s records is 2,800,000. Megan guaranteed the residual value of P100,000 upon its return of the asset to Cindy. Relevant PV factors are shown below:
· PV of annuity due for 8 periods at 10%: 5.87
· PV of ordinary annuity for 8 periods at 10%: 5.33
· PV of 1 for 8 periods at 10%: 0.47
How much is the dealer’s profit to be recognized by Cindy on commencement date?
· PV of annuity due for 8 periods at 10%: 5.87
· PV of ordinary annuity for 8 periods at 10%: 5.33
· PV of 1 for 8 periods at 10%: 0.47
How much is the dealer’s profit to be recognized by Cindy on commencement date?
a. 769,000
b. 2,753,000
c. 3,569,000
d. None – this is a direct finance lease
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