On January 1, 2021, Moo Company sold an asset with a carrying amount of P6,000,000 to Boo Company for P8,000,000. The asset had a fair value of P7,500,000 and a remaining useful life of six years. The asset was immediately leased back to Moo Company for a term of four years and annual rentals of P1,500,000 payable every yearend. The transfer qualified for as a sale and the lease was accounted for as a finance lease with an implicit interest rate of 12%.How much is the 2021 net income/loss of Moo Company relating to the sale and leaseback transaction? [Indicate whether it is a gain or loss]How much is the 2021 net income/loss of BooCompany relating to the sale and leaseback transaction? [Indicate whether it is a gain or loss]How much is the carrying amount of Moo Company's asset as of yearend 2021?How much is the 2022 net income/loss of Moo Company relating to the sale and leaseback transaction? [Indicate whether it is a gain or loss]How much is the 2022 net income/loss of Boo Company relating to the sale and leaseback transaction? [Indicate whether it is a gain or loss]How much is the carrying amount of Boo Company's asset as of yearend 2022?

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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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On January 1, 2021, Moo Company sold an asset with a carrying amount of P6,000,000 to Boo Company for P8,000,000. The asset had a fair value of P7,500,000 and a remaining useful life of six years. The asset was immediately leased back to Moo Company for a term of four years and annual rentals of P1,500,000 payable every yearend. The transfer qualified for as a sale and the lease was accounted for as a finance lease with an implicit interest rate of 12%.

How much is the 2021 net income/loss of Moo Company relating to the sale and leaseback transaction? [Indicate whether it is a gain or loss]
How much is the 2021 net income/loss of BooCompany relating to the sale and leaseback transaction? [Indicate whether it is a gain or loss]
How much is the carrying amount of Moo Company's asset as of yearend 2021?
How much is the 2022 net income/loss of Moo Company relating to the sale and leaseback transaction? [Indicate whether it is a gain or loss]
How much is the 2022 net income/loss of Boo Company relating to the sale and leaseback transaction? [Indicate whether it is a gain or loss]
How much is the carrying amount of Boo Company's asset as of yearend 2022?

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