Answered: What is the unearned income on the sale…

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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Question

On January 1, 2020, ABC Company sold equipment it had recently purchased to an unaffiliated entity for P5,700,000. The equipment had a book value on ABC books of P4,500,000 and remaining useful life of 5 years. On that same day, ABC leased back the equipment at P1,350,000 per year payable in advance for a 5-year period. The lessors implicit interest rate in the lease is 10%. ABC Company uses the double declining balance method of depreciation. What is the unearned income on the sale and leaseback on December 31, 2020?

a. 960,000

b. 720,000

c. 0

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