On Jan. 1, 2021, Sleepy Company entered into a direct financing lease. A third party guaranteed the residual value of the asset under the lease estimated to be Php1,200,000 on Jan. 1, 2025, the end of the lease term. Annual lease payments are Php1,000,000 due each Dec. 31, beginning Dec. 31, 2021. The last payment is due on Dec. 31, 2024. The remaining useful life of the asset was six years at the commencement of the lease. The lessor used 10% as the implicit interest rate. The PV of 1 at 10% for 5 periods is .62 and the PV of an ordinary annuity of P1 at 10% for 5 periods is 3.79.

On Jan. 1, 2021, Sleepy Company entered into a direct financing lease. A third party guaranteed the residual value of the asset under the lease estimated to be Php1,200,000 on Jan. 1, 2025, the end of the lease term. Annual lease payments are Php1,000,000 due each Dec. 31, beginning Dec. 31, 2021. The last payment is due on Dec. 31, 2024. The remaining useful life of the asset was six years at the commencement of the lease. The lessor used 10% as the implicit interest rate. The PV of 1 at 10% for 5 periods is .62 and the PV of an ordinary annuity of P1 at 10% for 5 periods is 3.79.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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