The following information pertains to an operating sale and leaseback of equipment by Cheerful Co. on December 31, 2019: Sales price P450, 000 Carrying amount 800,000 Monthly lease payment Fair market value 600,000 Estimated remaining life 10 years Lease term 5 years Annual rental P60, 000 Prevailing market rental for the same type of asset P75, 000 What amount of deferred loss on the sale should Cheerful report at December 31, 2020 assuming the prevailing market rate rent has yet to change?

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Q: determine the amount of loss to be recognized.

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A:

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.