On January 1, 2020 ABC Company sold a machinery to XYZ Company for P1,900,000. Because of the entity's commitments to its customers to provide their needs for the next four years, ABC simultaneously leased back the machinery. The transfer of the asset to the buyer qualifies to be accounted for as a sale under PFRS 15. Information relating to this transaction follows: Fair value of the machinery Carrying amount of machinery Remaining useful life of machinery Lease term Annual rent payable at the end of each year Market rate of interest Present value of 1 at 10% for four periods Present value of an ordinary annuity of 1 for four periods 2,200,000 1,700,000 8 years 5 years 500,000 10% 0.6830 3.1699 Required: Gain on sale and leaseback

On January 1, 2020 ABC Company sold a machinery to XYZ Company for P1,900,000. Because of the entity's commitments to its customers to provide their needs for the next four years, ABC simultaneously leased back the machinery. The transfer of the asset to the buyer qualifies to be accounted for as a sale under PFRS 15. Information relating to this transaction follows: Fair value of the machinery Carrying amount of machinery Remaining useful life of machinery Lease term Annual rent payable at the end of each year Market rate of interest Present value of 1 at 10% for four periods Present value of an ordinary annuity of 1 for four periods 2,200,000 1,700,000 8 years 5 years 500,000 10% 0.6830 3.1699 Required: Gain on sale and leaseback

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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