On January 1, 20x4, Makisig Company leased equipment to Western Company for a four-year period ending December 31, 20x7. The equipment cost Makisig Company P 300,000 and has an expected useful life of five years. Annual payments are P 109,046 (including P 10,000 executory costs). The equipment's fair value is P 400,000. The lessee guarantees the residual value of P 80,000. Lease payment is due every December 31 and Western made the first payment  on December 31, 20x4. 

Makisig Company's implicit rate, which is known to Western is 10%.Makisig incurred and paid P 15,000 in consummating the lease contract on January 1, 20x4.

 

Required:

1. How much sales should Makisig record from this transaction during 20x7?
2. How much is the total profit reported in Makisig Company's statement of comprehensive income for the year ended December 31, 20x4?
3. How much depreciation expenses should Makisig Company record on this equipment for the year 20x4?

Answer rating: 100% (QA)

1 Sales Recognition in 20x7 Since the lease term extends beyond one year and the fair value of the e... View the full answer