On January 1, 2020 ABC Company sold a machinery to XYZ Company for P1,900,000. Because of the entity's commitments to its customers to provide their needs for the next four years, ABC simultaneously leased back the machinery. The transfer of the asset to the buyer qualifies to be accounted for as a sale under PFRS 15. Information relating to this transaction follows: Fair value of the machinery Carrying amount of machinery Remaining useful life of machinery Lease term Annual rent payable at the end of each year Market rate of interest Present value of 1 at 10% for four periods Present value of an ordinary annuity of 1 for four periods 2,200,000 1,700,000 8 years 5 years 500,000 10% 0.6830 3.1699 Required: Gain on sale and leaseback
On January 1, 2020 ABC Company sold a machinery to XYZ Company for P1,900,000. Because of the entity's commitments to its customers to provide their needs for the next four years, ABC simultaneously leased back the machinery. The transfer of the asset to the buyer qualifies to be accounted for as a sale under PFRS 15. Information relating to this transaction follows: Fair value of the machinery Carrying amount of machinery Remaining useful life of machinery Lease term Annual rent payable at the end of each year Market rate of interest Present value of 1 at 10% for four periods Present value of an ordinary annuity of 1 for four periods 2,200,000 1,700,000 8 years 5 years 500,000 10% 0.6830 3.1699 Required: Gain on sale and leaseback
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 44P
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Transcribed Image Text:On January 1, 2020 ABC Company sold a machinery to XYZ Company for P1,900,000. Because of
the entity's commitments to its customers to provide their needs for the next four years, ABC
simultaneously leased back the machinery. The transfer of the asset to the buyer qualifies to be
accounted for as a sale under PFRS 15. Information relating to this transaction follows:
Fair value of the machinery
Carrying amount of machinery
Remaining useful life of machinery
Lease term
2,200,000
1,700,000
8 years
5 years
500,000
10%
Annual rent payable at the end of each year
Market rate of interest
Present value of 1 at 10% for four periods
Present value of an ordinary annuity of 1 for four periods
0.6830
3.1699
Required: Gain on sale and leaseback
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