What is the gross pro?t on the sale

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Problem - An entity adopted the policy of leasing as the primary method of selling its products. The entity constructed special equipment (main product) for JAZ Company at a cost of P8,500,000. The terms of the lease provided for annual advance payments of P2,500,000 to be paid over 10 years with ownership transferring to JAZ at the end of the lease term. It is estimated that the equipment will have a residual value of P1,600,000 at the end of the lease term. The lease payments began on January 1, 2021. The entity incurred initial direct cost of P500,000 in ?nalizing the lease agreement with JAZ. The rate implicit in the lease is 14% and the PV of an annuity due of l at 14% for 10 periods is 5.95. What is the gross pro?t on the sale?

Reference no: EM132977762

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