Problem 1 is in Intermediate Accounting Subject

PROBLEM 1

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 - Guaranteed P1,200,000.00

Lease Term 8 Years

Useful Life of Machinery 8 Years

Implicit Interest Rate 6%

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