Use the following information for #s 10-12. An entity is a manufacturer of machinery. It uses lease agreements to sell its product. On January 1, 2020, the company leased a machine to another company under the following terms: The lease term is 5 years • The annual rental is P500,000 payable every January 1, starting January 1, 2020 The machine has a cost to the company of P1,600,000 • Implicit interest rate in the lease, known to the lessee is 8% The machine reverts back to the entity at the end of 5 years with unguaranteed residual value of P400,000. The present value of factors of 1 and annuity due at 8% for 5 periods are 0.68 and 4.31, respectively. 10. What amount of sales revenue should be recognized by the entity? a. P2,155,000 b. P2,427,000 c. P2,555,000 d. P1,883,000
Use the following information for #s 10-12. An entity is a manufacturer of machinery. It uses lease agreements to sell its product. On January 1, 2020, the company leased a machine to another company under the following terms: The lease term is 5 years • The annual rental is P500,000 payable every January 1, starting January 1, 2020 The machine has a cost to the company of P1,600,000 • Implicit interest rate in the lease, known to the lessee is 8% The machine reverts back to the entity at the end of 5 years with unguaranteed residual value of P400,000. The present value of factors of 1 and annuity due at 8% for 5 periods are 0.68 and 4.31, respectively. 10. What amount of sales revenue should be recognized by the entity? a. P2,155,000 b. P2,427,000 c. P2,555,000 d. P1,883,000
Chapter1: An Introducti On To Taxation And Understa Nding The Federal Tax Law
Section: Chapter Questions
Problem 46DQ
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