Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Mergers, Acquisitions, And Corporate Restructurings

Authors: Patrick A Gaughan

7th Edition

1119380766, 9781119380764

More Books

Students also viewed these Accounting questions

Question

Differentiate between matrix and project structures.

Answered: 1 week ago