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What is the Gross Investment in the lease

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Question - On January 1, 2020, NU entered into a direct financing lease. A third party guaranteed the residual value of the asset under the lease estimated to be P1200,000 on January 1, 2025, the end of the lease term. Annual lease payments are P1,000,000 due each December 31, beginning, December 31, 2020. The last payment is due December 31, 2024.

The remaining useful life of the asset was six years at the commencement of the lease.

The lessor used 10% as the implicit interest rate. The PV of 1 at 10% for 5 periods is .62, and the PV of an ordinary annuity of 1 at 10% for 5 periods is 3.79.

a. How much is the net investment in the lease in the books of the lessor?

b. What is the Gross Investment in the lease?

c. What is the total unearned interest income?

Reference no: EM132905909

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