PROBLEM 2

On January 1, 2020, Lahat Pasado Padin Company leased a Machinery to another entity with the following details, the Lease is treated as Direct Financing Lease:

Annual Rental Payable at the end of each yearPhp 400,000

Bargain Purchase Option Php 250,000

Useful Life 5 years

Lease Term 5 years

Interest Rate 8%

\fPV of Ordinary Annuity of 8% for 5 periods 3.9927 PV of Annuity Due of 8% for 5 periods 4.3121 PV of 1 of 8% for 5 periods 0.6806