Question
On January 1, 2020, Walang Mass Promotion Company leased an Equipment to another entity with the following details, the Lease is treated as Direct Financing
On January 1, 2020, Walang Mass Promotion Company leased an Equipment to another entity with the following details, the Lease is treated as Direct Financing Lease:
Annual Rental Payable at the beginning of each yearP1,800,000.00
Residual Value - GuaranteedP1,200,000.00
Lease Term8 Years
Useful Life of Machinery8 Years
Implicit Interest Rate6%
PV of Ordinary Annuity of 6% for 8 periods
6.2098
PV of Annuity Due of 6% for 8 periods
6.5824
PV of 1 for 7 periods
0.6274
Payments starts on January 1, 2020
1.What is the Gross Investment?
2.What is the Unearned Interest Income?
3.At the end of the Lease Term the Fair Value of the Equipment is 1,000,000, how much is the Loss on Finance Lease?
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