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What amount should be reported as sales

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Reference no: EM133130320

Question - Vanessa Company is a dealer of machinery. On January 1, 2016, a machinery was leased to another entity with the following provisions: Annual rental payable at the end of each year 3,000,000 Lease term and useful life of machinery 5 years Cost of machinery 8,000,000 Unguaranteed residual value 1,000,000 Implicit interest rate 12% PV of an ordinary annuity of 1 for 5 periods at 12% 3.60 PV of 1 for 5 periods at 12% 0.57 At the end of the lease term on December 31, 2020, the machinery will revert to the lessor. The lessor incurred initial direct cost of P300,000 in finalizing the lease agreement.

Required -

1. What amount should be reported as sales in 2016 in relation to the sale type lease?

2. What total amount of income from the sales type lease should be reported for 2016?

Reference no: EM133130320

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