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DDE Corporation is in the business of leasing new sophisticated computer systems. As a lessor of computers, DDE purchased a new system on December 31,
DDE Corporation is in the business of leasing new sophisticated computer systems. As a lessor of computers, DDE purchased a new system on December 31, 2017. The system was delivered the same day (by prior arrangement) to General Investment Company, a lessee. The corporation accountant revealed the following information relating to the lease transaction: 10 years 8 years Cost of system to DDE P550,000 Economic life of the asset Go Lease term Expected residual value (guaranteed) P40,000 DDE implicit rate of interest 12% Generals incremental borrowing rate 14% Date of first lease payment Dec 31, 2017 Additional information is as follows: (a) At the end of the lease, the system will revert to DDE. (b) General is aware of DDE rate of implicit interest. (c) The lease rental consists of equal annual payments. (d) as agreed by both parties, PV factors are to be rounded off to 5 decimal places (e) Annual lease payments will be rounded off to the nearest peso to be used in the amortization of the lease as well. 1. The annual lease payment under the lease is? 2. The total expenses related to the lease that will be recognized by the lessee in 2019 is
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