At the beginning of current year, Jade Company purchased a new machine for P4,800,000 andleased it to East Company the same day.The machine has an estimated 12-year life and will depreciated P400,000 per year. The lease isfor a three-year be period at an annual rental of P850,000. Additionally, East Company paidP300,000 to Jade Company as a lease bonus to obtain the three-year lease. Jade Companyincurred insurance expense of P80,000 for the leased machine during the current year.

What is the operating profit of the lessor on the leased asset for the current year?


PROBLEM 2

Barnel Company owns and manages apartments. On signing a lease, each tenant must pay thefirst month and last month rent and a P50,000 refundable security deposit. The security deposit is rarely refundable in total because. cleaning costs of P15,000 perapartment are almost always deducted.About 30% of the time, the tenants are also charged for damages to the apartment whichtypically cost P10,000.If a one-year lease is signed on a P90,000 per month apartment, what amount should be reportedas refundable security deposit?