BSAIS 2A - Leases - Quiz 2

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1.Manuel Company is a dealer in machinery. On January 1, 2019, a
machinery is leased to another entity with the following provisions: Annual
rental payable at the end of each year 600,000 Lease term 5 years Useful
life of machinery 5 years Cost of machinery 2,500,000 Estimated residual
value 200,000 Initial direct cost paid by the lessor 100,000 Implicit interest
rate 10% PV of an ordinary annuity of 1 for 5 periods at 10% 3.7908 PV of 1
for 5 periods at 10% 0.6209 At the end of the lease term on December 31,
2023, the machinery will revert to Manuel Company. The perpetual
inventory system is used. What is the unearned interest income on 31
December 2020?. Single line text.

2.The Company is a manufacturer-dealer of machines. At the end of current

year 2019, a machine was leased to another entity with the following
provisions: Annual rental payable at the end of each year 2,000,000 Lease
term and useful life of machinery 5 years Cost of equipment 6,000,000 Fair
value of equipment on date of lease 7,000,000 Guaranteed residual value
500,000 Implicit interest rate 12% The Company made it first payment on
2019. The equipment will revert to the lessor at the end of the lease term.
The fair value of the asset is P500,000 at the end of the lease term. The
perpetual inventory system is used. The lessor incurred initial direct cost of
P100,000 in finalizing the lease agreement. What is the unearned interest
income on December 31, 2020?. Single line text.

3.Magnum Company had an asset costing P5,239,000. The asset is leased

on January 1, 2019 to another entity. Five annual lease payments are due
each January 1, beginning January 1, 2019. The lessee guaranteed the
P2,000,000 residual value of the asset as of the end of the lease term on
December 31, 2023. The implicit interest rate is 8%. The PV of 1 at 8% for 5
periods is .68, and the PV of an annuity of 1 in advance at 8% for 5, periods
is 4.31. What is the annual lease payment?. Single line text.

4.On January 1, 2019, Lessor Company leased a machine to Lessee

Company. The, machine had an original cost of P6,000,000. The lease term
was five years and the implicit interest rate on the lease was 15%. The lease
is properly classified as a direct financing lease. The annual lease payments
of P1,730,500 are made each December 31. The machine reverts to Lessor
at the end of the lease term, at which time the residual value of the
machine will be P300,000. The residual value is unguaranteed. The PV of 1
at 15% for 5 periods is .4972, and the PV of an ordinary annuity of 1 at 15%
for 5 periods is 3.3522. At the commencement of the Lease, what would be
the lease receivable and unearned income, respective? (Just add space to
separate the two answers) Ex. 1000 500. Single line text.

5.Camia Company is in the business of leasing new sophisticated

equipment. As lessor, the entity expects a 12% return. At the end of the
lease term, the equipment will revert to Camia Company. On January 1,
2019 an equipment is leased to another entity under a direct financing
lease. Cost of equipment to Camia 5,500,000 Residual value —
unguaraateed 400,000 Annual rental payable in advance 959,500 Useful life
and lease term 8 years Implicit interest rate 12% First lease payment
January 1, 2019 What is the unearned interest income on January 1, 2019?.
Single line text.

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