Saturday Corporation is in the business of leasing new sophisticated equipment. The lessor expects a 12% return on net investment. All leases are classified as direct lease. At the end of the lease term, the equipment will revert to the lessor. At the beginning of current year, an equipment is leased to a lessee with the following information: Cost of equipment to the lessor P5,000,000 Residual value — unguaranteed 600,000 Annual rental payable in advance at the beginning of each year 900,000 Initial direct cost incurred by the lessor 250,000 Useful life and lease term 8 years Implicit interest rate 12% What is the total unearned interest income?
Saturday Corporation is in the business of leasing new sophisticated equipment. The lessor expects a 12% return on net investment. All leases are classified as direct lease. At the end of the lease term, the equipment will revert to the lessor. At the beginning of current year, an equipment is leased to a lessee with the following information: Cost of equipment to the lessor P5,000,000 Residual value — unguaranteed 600,000 Annual rental payable in advance at the beginning of each year 900,000 Initial direct cost incurred by the lessor 250,000 Useful life and lease term 8 years Implicit interest rate 12% What is the total unearned interest income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Saturday Corporation is in the business of leasing new sophisticated equipment. The lessor expects a 12%
| Cost of equipment to the lessor | P5,000,000 |
| Residual value — unguaranteed | 600,000 |
| Annual rental payable in advance at the beginning of each year | 900,000 |
| Initial direct cost incurred by the lessor | 250,000 |
| Useful life and lease term | 8 years |
| Implicit interest rate | 12% |
What is the total unearned interest income?
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