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What the interest income to be recognized in the first year

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Reference no: EM132739505

Lessor Company leases computer equipment to customers under direct financing leases. An item of equipment was leased to a lessee with the following provisions:

Annual rental payable in advance P500,000
Lease term and useful life of equipment 5 years
Cost of equipment P1,955,000
Initial direct cost P65,000

Problem 1: The total interest income to be recognized over the lease term is:

a. P480,000

c. P545,000

b. P500,000

d. P273,700

Problem 2: The interest income to be recognized in the first year of the lease is:

a. P242,400

c. P273,700

b. P182,400

d. P203,700

Reference no: EM132739505

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