Accounting for Lease - LESSOR

Problem 4

DD Inc. Is engaged in leasing equipment. Such an equipment was delivered to a lessee on January 1, 2019 under a direct financing lease with the following provisions:

Cost of Equipment

4,361,200

Unguaranteed Residual Value

200,000

Useful life and lease term

8 years

Implicit Interest Rate

10%

Present value of an ordinary annuity of 1 for 8 years at 10%

5.335

Present value of 1 for 8 years at 10%

0.466

The annual rental is payable at the end of each year. The equipment will revert to the lessor upon the lease expiration.

What is the annual rental over the lease term?

A.800,000

B. 817,470

C. 779,980

D. 834,940

Problem 5

On January 1, 2019, EE Inc. (Lessor) Leased a machin to a FF Co. (Lessee). The machine had an original cost of P6,000,000. The lease term is 5 years and the implicit interest rate on the lease is 15%. The lease is properly classified as a direct financing lease.

The annual lease payments of P1,730,541 are made each December 31. The macine revers to Lessor at the end of the lease term, at which time the residual value isunguaranteed.

The PV of 1 at 15% for 5 periods is .4972, and the PV of an ordinary annuity of 1 at 15% for 5 periods is 3.3522.

At the commencement of the lease on January 1, 2019, what is balance of Lessor's net receivable and lease liability?

Lease ReceivableLessee Liability

A.6,000,0006,000,000

B.5,801,1205,801,120

C.6,000,0005,801,120

D.5,801,1206,000,000

can you show the whole solution for every problem