Don Company acquires equipment under a non-cancelable lease at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Don Company is given the option to purchase the asset for P75,000 which is significantly lower than the expected market value of the asset at the end of five years. The appropriate interest rate is 12%. What is the capitalized cost of the asset and the first year’s interest expense?(use four decimal places PV factor) A. P224,234 and P21,508 B.P224,234 and P26,908 C.P204,771 and P21,508 D.P204,771 and P19,173

Don Company acquires equipment under a non-cancelable lease at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Don Company is given the option to purchase the asset for P75,000 which is significantly lower than the expected market value of the asset at the end of five years. The appropriate interest rate is 12%. What is the capitalized cost of the asset and the first year’s interest expense?(use four decimal places PV factor) A. P224,234 and P21,508 B.P224,234 and P26,908 C.P204,771 and P21,508 D.P204,771 and P19,173

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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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. Assume it is a direct finance lease with an implicit rate of 12% and the residual value is unguaranteed, how much is the net lease receivable as of yearend 2022?
Don Company acquires equipment under a non-cancelable lease at an annual rental of P45,000 payable in advance for five years. Under the lease contract, Don Company is given the option to purchase the asset for P75,000 which is significantly lower than the expected market value of the asset at the end of five years. The appropriate interest rate is 12%. What is the capitalized cost of the asset and the first year's interest expense? (use four decimal places PV factor) A. P224,234 and P21,508 B. P224,234 and P26,908 C. P204,771 and P21,508 D. P204,771 and P19,173
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. Assume it is a direct finance lease with an implicit rate of 12% and the residual value is guaranteed, how much is the interest income for 2020?
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. Assume it is a sales-type lease with an implicit rate of 10%, how much is the net lease receivable as of yearend 2020? Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, how much should be credited to sales resulting from the lease? Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, how much is cost of sales resulting from the lease? Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, how much is the net income from the lease to be reported in 2020? Assume the residual value is unguaranteed and the fair…
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. Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, how much is cost of sales resulting from the lease?
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