An entity is a dealer in equipment. At the beginning of current year, an equipment was leased to another entity under a sales type lease with the following provisions: Annual rental payable at the end of each year 1,500,000 Lease term and useful life of machinery, 5 years Cost of equipment 4,000,000 Fair value of equipment on date of lease 6,000,000 Guaranteed residual value 500,000 Implicit interest rate 12% PV of an ordinary annuity of 1 for 5 periods at 12% 3.60 PV of 1 for 5 periods at 12% 0.57 The equipment will revert to the lessor at the end of lease term. The fair value of the asset is P350,000 at the end of lease term. The perpetual inventory system is used. The lessor incurred initial direct cost of P200,000 in finalizing the lease agreement.

1.) What is the gross investment in the lease?

8,000,000
	6,000,000
	4,000,000
	7,500,000

2. What is the net investment in the lease?

	4,000,000
	5,400,000
	3,500,000
	5,685,000

3.) What is the total financial revenue?

	2,315,000
	2,000,000
	2,600,000
	2,285,000

4.)What amount of interest income should be recognized for the current year?

648,000

720,000

682,200

480,000

5. What amount should be reported as gross income on sale for the current year?

	1,800,000
	1,685,000
	2,000,000
	1,485,000