Answered: Present value of 1 discounted at 10%…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

See similar textbooks

Related questions

Question

On January 1, 2012, Thelma Industries leased equipment to Tricia Company for a four-year period ending December 31, 2015. The equipment cost Thelma P300,000 and has an expected useful life of five years. Annual payments are P118,951, including P10,000 executory costs. The equipment's fair value is P400,000. The lessee guarantees the residual value of P80,000. Lease payment is due every December 31 and Tricia made the first payment on December 31, 2012. Thelma incurred P15,000 costs contract. The rate implicit in the lease after adjustments for the costs incurred by Thelma is 10%. Present value of 1 discounted at 10% for 4 periods is 0.68301. Present value of annuity due of 1 for 4 periods discounted at 10% is 3.48685. Present value of ordinary annuity of 1 at 10% for 4 periods is 3.16987. How much profit, inclusive of interest revenue, should Thelma report from this lease for the year ended December 31, 2012?

a. P100,000

b. P125,000

c. P140,000

d. P162,991

Expert Solution