Prudent Company uses leases as a means of selling its equipment. On July 1,2020, the company leased
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Question:
Prudent Company uses leases as a means of selling its equipment. On July 1,2020, the company leased machine to Corolla Trading. The cost of the machine to Prudent was P784,500. The fair value (which was the sales price) was P1,011,840 at the time of lease. Annual lease payments are P135,000 and are payable in advance for 12 years. At the end of the lease term, title to the machine will pass to Corolla. Implicit interest rate is 10%.
REQUIREMENT:
Compute for the following 1. Manufacturer’s profit recognized in the year 2020.
2. Total financial revenue pertaining to the lease.
3. Interest revenue recognized in the year 2020.
4. How much is the Net finance lease receivable balance on December 31, 2020?
Expert Answer:
Solution 1 Manufacturers profit recognized in the year 2020 P 227340 Explanation i This is a lease in which the ownership will be transferred to the l... View the full answer
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