Vanderbilt Company is a dealer in machinery. On January 1, 2010 machinery was leased to another enterprise with the following provisions: Annual rental payable at the end of each year, 3,000,000 Lease term and useful life of machinery, 5 years Cost of machinery, 8,000,000 Residual value-unguaranteed, 1,000,000 Implicit interest rate, 12% PV of an ordinary annuity of 1 for 5 periods at 12% 3.60 PV of 1 for 5 periods at 12% 0.57 At the end of the lease term on December 31, 2010, the machinery will revert to Vanderbilt. The perpetual inventory system is used. Vanderbilt incurred initial direct cost of P300,000 in finalizing the lease agreement. What is the total financial revenue from the lease? a. 4,630,000 b. 4,200,000 c. 5,200,000 d. 3,630,000
Vanderbilt Company is a dealer in machinery. On January 1, 2010 machinery was leased to another enterprise with the following provisions: Annual rental payable at the end of each year, 3,000,000 Lease term and useful life of machinery, 5 years Cost of machinery, 8,000,000 Residual value-unguaranteed, 1,000,000 Implicit interest rate, 12% PV of an ordinary annuity of 1 for 5 periods at 12% 3.60 PV of 1 for 5 periods at 12% 0.57 At the end of the lease term on December 31, 2010, the machinery will revert to Vanderbilt. The perpetual inventory system is used. Vanderbilt incurred initial direct cost of P300,000 in finalizing the lease agreement. What is the total financial revenue from the lease? a. 4,630,000 b. 4,200,000 c. 5,200,000 d. 3,630,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vanderbilt Company is a dealer in machinery. On January 1, 2010 machinery was leased to another enterprise with the following provisions:
Annual rental payable at the end of each year, 3,000,000
Lease term and useful life of machinery, 5 years
Cost of machinery, 8,000,000
Residual value-unguaranteed, 1,000,000
Implicit interest rate, 12%
PV of an ordinary annuity of 1 for 5 periods at 12% 3.60
PV of 1 for 5 periods at 12% 0.57
At the end of the lease term on December 31, 2010, the machinery will revert to Vanderbilt. The perpetual inventory system is used. Vanderbilt incurred initial direct cost of P300,000 in finalizing the lease agreement.
What is the total financial revenue from the lease?
Annual rental payable at the end of each year, 3,000,000
Lease term and useful life of machinery, 5 years
Cost of machinery, 8,000,000
Residual value-unguaranteed, 1,000,000
Implicit interest rate, 12%
PV of an ordinary annuity of 1 for 5 periods at 12% 3.60
PV of 1 for 5 periods at 12% 0.57
At the end of the lease term on December 31, 2010, the machinery will revert to Vanderbilt. The perpetual inventory system is used. Vanderbilt incurred initial direct cost of P300,000 in finalizing the lease agreement.
What is the total financial revenue from the lease?
a. 4,630,000
b. 4,200,000
c. 5,200,000
d. 3,630,000
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