Answered: What amount of interest income that…

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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Patbingsu Machineries, dealer of machinery and equipment, leased equipment to Africa Products on July 1, 2019. The lease is appropriately accounted for as a sale by Patbingsu and as a purchase by Africa. The lease is for 10-year period (the useful life of the asset) expiring on July 1, 2029. The first ten equal annual payments of P250,000 was made on July 1, 2019. Patbingsu purchased the equipment for P1,337,500 on January 1, 2019 and established a list selling price of P1,687,500 on the equipment. Assume that the present value at July 1, 2019 of the payments over the lease term discounted at 12% was P1,582,500. What amount of interest income that Patbingsu should record for the year ended December 31, 2019?

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