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What amount of gross profit on sale should be recognized

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Question - Ricky Company is a dealer in property. On January 1, 2020, the entity entered into a finance lease with Peter Inc. under which it would pay P200,000 every January 1 commencing in 2020. The lease contract contains 5 years of lessor-lessee relationship. The cost of the car is P600,000 and its fair value is P750,000. To secure a formal turnover of rights, Ricky paid legal fees of P20,000 to an attorney in arranging the lease with the courts. What amount of gross profit on sale should be recognized for the year ended December 31, 2020?

a. P150,000

b. P130,000

c. P20,000

d. P0

Reference no: EM133078570

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