1. Sensible Company sold an item of plant and machinery on January 1, 2010 for P2,500,000, it's fair value, when its carrying amount was P2,000,000. Sensible company leased the item back on that date for 5 years, the item's remaining useful life. Lease payments are P700,000 on January 1 each year. What is the total finance charge over the lease term?

A. 500,000

B. 1,500,000

C. 0

D. 1,000,000

2. Magnum Company owns an asset costing P5,239,000. The asset is leased on January 1, 2010 to another entity. Five annual lease payments are due each January 1, beginning January 1, 2010. The lessee guarantees the P2,000,000 residual value of the asset as of the end of the lease term on December 31, 2014. The lessor's implicit implicit interest rate is 8%. The PV of 1 at 8% for 5 periods is .68, and the PV of an annuity of 1 in advance at 8% for 5 periods is 4.31. What is the annual lease payment?

A. 900,000

B. 1,215,545

C. 751,500

D. 1,531,090