On January 1, 2020, Bacarra Company leased an asset for a term of six years. Annual rentals of P500,000 is payable every yearend. The cost of the leased asset is P2,100,000. Initial direct costs paid by Bacarra totaled P6,360. The asset will revert to Bacarra at the end of the lease term, when its residual value would amount to P100,000. 1. Assume it is a sales-type lease with an implicit rate of 10%, how much is the net lease receivable as of yearend 2020? 2. Assume the residual value is unguaranteed and the fair value of the leased asset at the end of the lease term is P80,000, how much is the loss on finance lease?
On January 1, 2020, Bacarra Company leased an asset for a term of six years. Annual rentals of P500,000 is payable every yearend. The cost of the leased asset is P2,100,000. Initial direct costs paid by Bacarra totaled P6,360. The asset will revert to Bacarra at the end of the lease term, when its residual value would amount to P100,000. 1. Assume it is a sales-type lease with an implicit rate of 10%, how much is the net lease receivable as of yearend 2020? 2. Assume the residual value is unguaranteed and the fair value of the leased asset at the end of the lease term is P80,000, how much is the loss on finance lease?
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter10: Long-term Liabilities
Section: Chapter Questions
Problem 10.5AP
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On January 1, 2020, Bacarra Company leased an asset for a term of six years. Annual rentals of P500,000 is payable every yearend. The cost of the leased asset is P2,100,000. Initial direct costs paid by Bacarra totaled P6,360. The asset will revert to Bacarra at the end of the lease term, when its residual value would amount to P100,000.
1. Assume it is a sales-type lease with an implicit rate of 10%, how much is the net lease receivable as of yearend 2020?
2. Assume the residual value is unguaranteed and the fair value of the leased asset at the end of the lease term is P80,000, how much is the loss on finance lease?
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