Solution-What amount should volatile report as gross profit

What amount should volatile report as gross profit on sale

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Reference no: EM132796673

Volatile Company is a dealer in 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 the machinery 5 years
Cost of machinery 8,000,000
Unguaranteed Residual Value 1,000,000
Implicit interest rate 12%
Present value of an ordinary annuity of 1 for 5 periods at 12% is 3.60, while present value of 1 for 5 periods at 12% is 0.57.
At the end of the lease term on December 31, 2020, the machinery will revert to Volatile. Volatile incurred initial direct cost of P300,000 in finalizing the lease agreement.

Problem 1: What is the unearned interest income on January 1, 2016?

Problem 2: What amount should volatile report as gross profit on sale in 2016?

Problem 3: What is the interest income for 2016?

Reference no: EM132796673

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What amount should volatile report as gross profit on sale

Reference no: EM132796673

Reference no: EM132796673

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