MON Co. Is a dealer in machinery. On January 1, 2016, a machinery was leased to another entity with the following provisions: gular Snip 3,000,000 Annual rental payable at the end of each year Lease term and useful life of machinery Cost of machinery 5 years 8,000,000 Residual value- unguaranteed 1,000,000 Implicit interest rate 12% PV of an ordinary annuity of 1 for 5 periods at 12% 3.60 PV of 1 for 5 periods at 12% 0.57 At the end of the lease term on Dec. 31, 2020, the machinery will revert to MON Co. MON incurred initial direct cost of P 300,000 in finalizing the lease agreement. What is the unearned interest income on January 1, 2016?
MON Co. Is a dealer in machinery. On January 1, 2016, a machinery was leased to another entity with the following provisions: gular Snip 3,000,000 Annual rental payable at the end of each year Lease term and useful life of machinery Cost of machinery 5 years 8,000,000 Residual value- unguaranteed 1,000,000 Implicit interest rate 12% PV of an ordinary annuity of 1 for 5 periods at 12% 3.60 PV of 1 for 5 periods at 12% 0.57 At the end of the lease term on Dec. 31, 2020, the machinery will revert to MON Co. MON incurred initial direct cost of P 300,000 in finalizing the lease agreement. What is the unearned interest income on January 1, 2016?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
REQUIREMENTS:
1. What is the unearned interest income on January 1,2016?
2. What amount should be reported as gross profit on sale in 2016?
3. What is the interest income for 2016?
Transcribed Image Text:MON Co. Is a dealer in machinery. On January 1, 2016, a machinery was leased to
another entity with the following provisions:
gular Snip
Annual rental payable at the end of each year
3,000,000
5 years
Lease term and useful life of machinery
Cost of machinery
8,000,000
Residual value- unguaranteed
1,000,000
Implicit interest rate
12%
PV of an ordinary annuity of 1 for 5 periods at 12%
3.60
PV of 1 for 5 periods at 12%
0.57
At the end of the lease term on Dec. 31, 2020, the machinery will revert to MON Co.
MON incurred initial direct cost of P 300,000 in finalizing the lease agreement.
What is the unearned interest income on January 1, 2016?
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