Reference no: EM133074612
Question - At the beginning of current year, Lessor Company leased a machine to Lessee Company. The machine had an original cost of P6,000,000. The lease term was five years and the implicit interest rate on the lease was 15 %. The lease is properly classified as a direct financing lease. The annual lease payments of P1,750,000 are made each December 31.
The machine reverts to Lessor at the end of the lease term, at which time the residual value of the machine will be P275,000. The residual value is unguaranteed.
1. At the commencement of the lease, what would be the net lease receivable on the part of the lessor?
a. 6,275,000 b. 8,750,000 c. 6,000,000 d. 5,725,000
2. What is the gross investment in the lease?
a. 8,750,000 b. 9,025,000 c. 6,000,000 d. 8,475,000
3. What is the total unearned interest income?
a. 3,025,000 b. 2,750,000 c. 2,475,000 d. 6,000,000
4. What is the interest income for the current year?
a. 1,312,500 b. 1,353,750 c. 900,000 d. 450,000
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