On January 1,2020, an equipment of ABC Company with a carrying value of P 1,500,000 was sold at P 2,000,000 equal to its fair value to DEF Company. ABC immediately leased back the equipment from DEF Company with an annual rental of P 150,000 for 5 years, payable every December 31 of each year. The market rate of interest is 10%. How much is the gain on sale leaseback to be recognized by ABC Company? (For present value factors, do not round off) * O P 568,618.02 O P 426,463.51 O P 1,073,536.49 O P 357,845.49

On January 1,2020, an equipment of ABC Company with a carrying value of P 1,500,000 was sold at P 2,000,000 equal to its fair value to DEF Company. ABC immediately leased back the equipment from DEF Company with an annual rental of P 150,000 for 5 years, payable every December 31 of each year. The market rate of interest is 10%. How much is the gain on sale leaseback to be recognized by ABC Company? (For present value factors, do not round off) * O P 568,618.02 O P 426,463.51 O P 1,073,536.49 O P 357,845.49

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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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

On January 1,2020, an equipment of ABC Company with a carrying value of P 1,500,000 was
sold at P 2,000,000 equal to its fair value to DEF Company. ABC immediately leased back the
equipment from DEF Company with an annual rental of P 150,000 for 5 years, payable every
December 31 of each year. The market rate of interest is 10%.
How much is the gain on sale leaseback to be recognized by ABC Company? (For present
value factors, do not round off) *
O P 568,618.02
O P 426,463.51
O P1,073,536.49
O P 357,845.49

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