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What is the unearned interest income on january

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Question - Vanderbilt Company is a dealer in machinery. On January 1, 2021, a machine was leased to another entity with the following provisions:

Annual rental payable at the end of each year P3,000,000

Lease term and useful life of machinery 5 years

Cost of machinery P8,000,000

Residual value - unguaranteed 1,000,000

Implicit interest rate 12%

PV of ordinary annuity of 1 for 5 periods at 12% 3.60

PV of 1 for 5 periods at 12% 0.57

At the end of the lease term on December 31, 2025, the machinery will revert to Vanderbilt. Vanderbilt incurred initial direct cost of P300,000 in finalizing the lease agreement.

Required -

1. What is the unearned interest income on January 1, 2021?

2. What amount should Vanderbilt Company report as gross profit on sale in 2021?

Reference no: EM133188485

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