Problem 3. Direct Financing Lease with Residual Value On January 1, 20x1, Information on the lease is shown below: ABC Financing Co leased equipment to XYZ, Inc. Cost of Equipment Useful Life of Equipment P330,647 5 years 4 years 100,000 Lease Term Annual Rent Payable at the end of each year. Interest Rate Implicit in the lease Residual Value The equipment will revert back to ABC at the end The lease is classified as direct financing lease. 10% 20,000 of the lease term. Requirements: Compute for the following assuming the residual value is (1) guaranteed and (2) unguaranteed a. Gross Investment in the lease on January 1, 20x1 b. Net Investment in the lease on January 1, 20x1 c. d. Unearned Interest income on January 1, 20x1 Prepare the journal entries on January 1, 20x1 and December 31, 20x1 e. Prepare the journal entry on December 31, 20x4 if the fair value of the residual value i. P20,000 ii. P5,000