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On March 31, 2021, SIX Company as lessee signed a ten-year non-cancelable lease for an equipment stipulating annual payments of P375,250. The first payment was made on March 31, 2021 and P375,250 annually on each March 31 for the next nine years. The present value on March 31, 2021 of the ten lease payments over the lease term using the rate implicit in the lease which SIX knows to be 12% was $3,175,500. The March 31, 2021 present value of the lease payments using SIX's incremental borrowing rate of 14% was #2,850,125. Ownership of the property remains with the lessor at expiration of the lease. There is no purchase option. The leased property has an estimated economic life of 12 years