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What is the operating profit of the lessor on leased asset

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At the beginning of current year, CAT Trucks and Services purchased a new equipment for P5,000,000 and leased it to MDC on August of the current year. The machine has an estimated 9-year life with a residual value of P500,000. The lease is for a three-year period at an annual rental of P1,000,000.

  • Additionally, MDC paid 300,000 to CAT as a lease bonus to obtain a three-year lease. CAT incurred insurance expense of P80,000 for the leased machine during the current year.

Problem 1: What is the operating profit of the lessor on the leased asset for the current year?

Reference no: EM132832649

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