Gold Estate is in the business of leasing new sophisticated equipment. As lessor, the entity expects a 12 % return. At the end of the lease term, the equipment will revert to Gold Estate . On January 1, 2016 an equipment is leased to another entity under a direct financing lease. Cost of Equipment to Gold Estate P 5,500,000 Residual Value- unguaranteed 400,000 Annual rental payable in advance 959,500 Useful life and lease term 8 years Implicit interest rate 12% First lease payment January 1, 2016 REQUIREMENTS: 1.What is the gross investment in the lease? 2.What is the unearned interest income on January 1, 2016? 3.What is the interest income for 2016?
Gold Estate is in the business of leasing new sophisticated equipment. As lessor, the entity expects a 12 % return. At the end of the lease term, the equipment will revert to Gold Estate . On January 1, 2016 an equipment is leased to another entity under a direct financing lease.
Cost of Equipment to Gold Estate P 5,500,000
Residual Value- unguaranteed 400,000
Annual rental payable in advance 959,500
Useful life and lease term 8 years
Implicit interest rate 12%
First lease payment January 1, 2016
REQUIREMENTS:
1.What is the gross investment in the lease?
2.What is the unearned interest income on January 1, 2016?
3.What is the interest income for 2016?
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