MISTLETOE Company is a dealer in equipment. The entity leased equipment to a lessee on January 1, 2021 for an eight-year period expiring January 1, 2029. Equal annual payments under the lease are due at the end of each year beginning December 31, 2021. The lease agreement included a guaranteed residual value of P200,000 and an implicit rate of 10%. It was determined that the fair value of the asset is P3,000,000. The carrying amount is P2,500,000 and that the present value of the minimum lease payment at 10% is P2,760,900. The PV of 1 at 10% for 8 periods is 0.467, and the PV of an ordinary annuity of 1 at 10% for 8 periods is 5.335. HOW MUCH IS THE GROSS INVESTMENT THAT SHOULD BE INITIALLY RECOGNIZED AS LEASE RECEIVABLE? A. 4,000,000
MISTLETOE Company is a dealer in equipment. The entity leased equipment to a lessee on January 1, 2021 for an eight-year period expiring January 1, 2029. Equal annual payments under the lease are due at the end of each year beginning December 31, 2021. The lease agreement included a guaranteed residual value of P200,000 and an implicit rate of 10%. It was determined that the fair value of the asset is P3,000,000. The carrying amount is P2,500,000 and that the present value of the minimum lease payment at 10% is P2,760,900. The PV of 1 at 10% for 8 periods is 0.467, and the PV of an ordinary annuity of 1 at 10% for 8 periods is 5.335. HOW MUCH IS THE GROSS INVESTMENT THAT SHOULD BE INITIALLY RECOGNIZED AS LEASE RECEIVABLE? A. 4,000,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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MISTLETOE Company is a dealer in equipment. The entity leased equipment to a lessee on January 1, 2021 for an eight-year period expiring January 1, 2029. Equal annual payments under the lease are due at the end of each year beginning December 31, 2021. The lease agreement included a guaranteed residual value of P200,000 and an implicit rate of 10%. It was determined that the fair value of the asset is P3,000,000. The carrying amount is P2,500,000 and that the present value of the minimum lease payment at 10% is P2,760,900. The PV of 1 at 10% for 8 periods is 0.467, and the PV of an ordinary annuity of 1 at 10% for 8 periods is 5.335.
HOW MUCH IS THE GROSS INVESTMENT THAT SHOULD BE INITIALLY RECOGNIZED AS LEASE RECEIVABLE?
A. 4,000,000
B. 3,840,150
C. 3,000,000
D. 4,140,056
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