On January 1, 2020, Beatrice Company sold an equipment with a remaining life of 20 years and immediately lease it back for a period of 5 years. Below are the relevant data: · Sale price at above fair value: P20,000,000 · Fair value of building: 18,000,000
On January 1, 2020, Beatrice Company sold an equipment with a remaining life of 20 years and immediately lease it back for a period of 5 years. Below are the relevant data: · Sale price at above fair value: P20,000,000 · Fair value of building: 18,000,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2020, Beatrice Company sold an equipment with a remaining life of 20 years and immediately lease it back for a period of 5 years. Below are the relevant data:
· Sale price at above fair value: P20,000,000
· Fair value of building: 18,000,000
· Carrying amount of building: 10,800,000
· Annual rental payable at the end of each year: 1,500,000
· Implicit rate: 12%
PV factor for an ordinary annuity at 12% for five periods is 3.60. How much shall the buyer-lessor recognize as gross rental income anddepreciation of the building, respectively?
· Sale price at above fair value: P20,000,000
· Fair value of building: 18,000,000
· Carrying amount of building: 10,800,000
· Annual rental payable at the end of each year: 1,500,000
· Implicit rate: 12%
PV factor for an ordinary annuity at 12% for five periods is 3.60. How much shall the buyer-lessor recognize as gross rental income and
a. 555,556 ; 900,000
b. 944,444 ; 900,000
c. 555,556 ; 1,000,000
d. 944,444 ; 3,600,000
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