Reference no: EM132729754

The following data relate to a sale and leaseback of equipment of Mrs. Robinson Co on December 31,2018.

Sales Price (equal to the present value of rentals) P993,630

Cost of Equipment 1,200,000

Accumulated Depreciation 100,000

Annual Rental Payable 300,000

Estimated remaining life 5

Lease Term 4

Implicit rate 8%

Problem 1: What amount of loss on sale and leaseback should Mrs. Robinson Co. recognized immediately as of December 31, 2018?

Option 1: Nil

Option 2: 106,370

Option 3: 206,370

Option 4: 506,370

Problem 2: Assume instead that the cost of the equipment is P1,000,000 and the accumulated depreciation is P100,000, what amount of gain on sale and leaseback should Mrs. Robinson Co. recognized as of December 31,2018?

Option 1: Nil

Option 2: 93,630

Option 3: 18,726

Option 4: 23,408