What amount should be recognized as interest income for 2019? 194,160 154,160 172,400 128,000 What amount gross income should be recognized by the entity for 2019? 555,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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An entity is a manufacturer of machinery. It uses lease agreements to sell its product. On January 1, 2019, the entity leased a machine to another entity under the following terms: • The lease term is 5 years. • The annual rental is P500,000 payable every January 1, 2019. • The machine has a cost to the entity 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 factors of 1 and annuity due at 8% for 5 periods are 0.68 and 4.21 respectively.

What amount should be recognized as interest income for 2019?

194,160

154,160

172,400

128,000

What amount gross income should be recognized by the entity for 2019?

555,000

827,000

955,000

700,000

 

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