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How much is the cost of sales to be recognized

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Reference no: EM133205883

Problem 1

Claire Company leased equipment to a lessee on January 1, 2021. The lease is for an eight-year period expiring on December 31, 2028. The first of eight equal annual payments of P900,000 was made on January 1, 2021 and subsequent payments will be made every January 1 thereafter. Claire had purchased the equipment on December 29, 2020 for P4,800,000. Claire paid P150,000 in connection with negotiating and arranging the lease. The lease is appropriately accounted for as a dealer's lease by Claire. The present value on January 1, 2021 of all rent payments over the lease term discounted at a 10% interest rate was P5,280,000.

1. How much is the Cost of Sales to be recognized in 2021?

2. How much is the Interest Revenue in 2021?

3. How much is the Net Investment in the Lease at December 31, 2022?

Problem 2

AC Company leased equipment to a lessee on January 1, 2021. The lease is for an eight-year period expiring on December 31, 2028. The first of eight equal annual payments of P900,000 was made on January 1, 2021 and subsequent payments will be made every January 1 thereafter. AC had purchased the equipment on December 29, 2020 for P5,280,000, which is equal to its fair value. AC also paid P150,000 in connection with negotiating and arranging the lease. The lease is appropriately accounted for as a direct finance lease by AC.

1. How much is the Interest Revenue in 2021?

2. How much is the Net Finance Lease Receivable at December 31, 2022?

Reference no: EM133205883

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