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Compute the interest revenue to be recognized

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Question - On January 1, 2020, Amaze Company leased computer equipment to customers under direct financing lease to Shazar Company. Annual lease payments of P75,000 are made at the beginning of each period. The equipment has no residual value at the end of the lease and the lease does not contain bargain purchase option. The entity wishes to earn 8% interest on a 5-year lease of equipment with a cost of P323,400. The present value of an annuity due of 1 at 8% for years is 4.312.

Required -

1. Compute the interest revenue to be recognized over the lease term.

2. Prepare the journal entries on the books of the lessor for 2020?

Reference no: EM132811735

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