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What amount of interest income should be reported in income

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Problem 1: On January 1, 2021, Qiqi Company, as a lessor, leased an equipment for ten years at an annual rental of P1,200,000, payable by Klee Company, the lessee, at the beginning of each year. The lease is appropriately accounted for as finance lease. The equipment had a cost of P8,400,000 with an estimated life of 12 years and no residual value. The straight line depreciation is used. The implicit rate is 9%. What amount of interest income should be reported in the income statement for 2021?

a. 500.000

b. 648,000

c. 756,000

d. 360,000

Reference no: EM132829771

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