Miami Company leased equipment from Heat Inc. on July 1, 2019, for an 8-year period. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2019. The interest rate contemplated by Miami and Heat is 10%. The carrying value of the equipment on Heat's accounting records is P2,800,000. Residual value of P100,000 at the end of lease term is guaranteed by Miami. The lease is appropriately recorded as a sales-type lease.
Miami Company leased equipment from Heat Inc. on July 1, 2019, for an 8-year period. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2019. The interest rate contemplated by Miami and Heat is 10%. The carrying value of the equipment on Heat's accounting records is P2,800,000. Residual value of P100,000 at the end of lease term is guaranteed by Miami. The lease is appropriately recorded as a sales-type lease.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
How much is the dealer’s profit that Heat Inc. should recognize for the year 2019?
722,000
384,500
769,000
48,063
How much is the sales that should be recognize by Heat Inc.?
3,552,000
3,569,000
3,425,000
3,198,000
How much is the cost of goods sold that should be recognized by Heat Inc. assuming the residual value is unguaranteed?
2,800,000
2,753,000
3,569,000
3,522,000
How much is the interest income for the year 2019 that should be recognized by Heat Inc.?
356,900
178,450
148,450
296,900
Transcribed Image Text:Miami Company leased equipment from Heat Inc. on July 1, 2019, for an 8-year period. Equal payments
under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1,
2019. The interest rate contemplated by Miami and Heat is 10%. The carrying value of the equipment on
Heat's accounting records is P2,800,000. Residual value of P100,000 at the end of lease term is guaranteed
by Miami. The lease is appropriately recorded as a sales-type lease.
Present value of an annuity of 1 in advance for 8 periods at 10%
5.87
Present value of an ordinary annuity of 1 for 8 periods at 10%
Present value of 1 for 8 periods at 10%
5.33
0.47
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