On January 1, 20x1, IMBROGLIO Co. (lessor) leased a piece of equipment to COMPLICATION, Inc. Information on the lease is shown below:Cost of equipment₱1,200,000Useful life of equipment5 yearsLease term4 yearsAnnual rent payable at the start of each year₱400,000Interest rate implicit in the lease10%IMBROGLIO Co. incurred initial direct costs of ₱80,000.How much is the gross investment in the lease on January 1, 20x1 after the first lease payment if the lease is accounted for as a sales type lease?1,680,0001,200,0002,000,0001,800,000

Solution: Gross investment in lease = Total amount of lease payments - First lease payment

Answered: On January 1, 20x1, IMBROGLIO Co.…

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, 20x1, IMBROGLIO Co. (lessor) leased a piece of equipment to COMPLICATION, Inc. Information on the lease is shown below:

Cost of equipment	₱1,200,000
Useful life of equipment	5 years
Lease term	4 years
Annual rent payable at the start of each year	₱400,000
Interest rate implicit in the lease	10%

IMBROGLIO Co. incurred initial direct costs of ₱80,000.

How much is the gross investment in the lease on January 1, 20x1 after the first lease payment if the lease is accounted for as a sales type lease?

1,680,000
1,200,000
2,000,000
1,800,000

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