Direct Finance Lease – Lessor (PAS 17 and PFRS 16) Problem 18. On January 1,2011, SM leased an equipment to RFM Inc. with the following details: Cost of Machinery P3,760,100 Residual value – guaranteed 400,000 Useful life and lease term 4 years Implicit interest rate 10% Annual rental is payable in advance on January 1 Required: Based on the result of your audit, determine the following: ____________1. Annual Rental ____________2. Gross Receivable or Investment ____________3. Unearned Interest ____________4. Interest Income on 2011 ____________5. Carrying Value of Lease Receivable on January 1,2012

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.