1 Abe Company, lessor, lease an equipment under operating lease.

The term is 5 years and the lease payments are made in advance on January 1 of each year as shown in the followin

January 1, 2020 ₱1,500,000.00

January 1, 2021 1,600,000.00
January 1, 2022 1,700,000.00
January 1, 2023 1,800,000.00
January 1, 2024 1,900,000.00
Total ₱8,500,000.00

Compute the:
a Rent Income for the year 2020 ₱1,700,000.00
b Rent Receivable for December 31 2020 200,000.00
c Rent Income for the year 2021 1,700,000.00
d Rent Receivable for December 31 2021 300,000.00

2 Macedonia Company entered into leasing business. The entity acquired a specialized machine for P5,000,000.00 cas

The PV of ordinary annuity at 11% for 6 periods 4.2305

The PV of annuity in advance of 1 at 11% for 6 periods 4.6959
The PV of 1 at 11% for 6 period 0.5346

Compute
a Annual Rental (Rounded to whole numbers) ₱1,118,709.37
b Total Financial Revenue 2,212,256.23
c Interest Income for 2020 550,000.00
d Interest Income for 2021 487,442.01
e. Carrying amount of Lease Receivable on 12/31/2020 4,431,290.63

3 Reagan Company used leases as a method of selling products (SALES TYPE LEASE). In 2020, Reagan Company c
a construction of a passenger ferry.

Original cost of the ferry ₱6,000,000.00

Residual Value 1,000,000.00
Annual Payment 2,000,000.00
Implicit Interest Rate 11%
Incremental Rate 12%
 Date of first lease payment December 31 2020
Lease term 5 years

The PV of ordinary annuity at 12% for 5 periods 3.6048

The PV of ordinary annuity at 11% for 5 periods 3.6959
The PV of 1 at 12% for 5 periods 0.5674
The PV of 1 at 11% for 5 periods 0.5935

Compute:

a Gross Investment in the lease ₱10,000,000.00

b Net Investment in the lease 7,391,800.00
c Gross Profit
Unearned for 2020
Interest Income or the Total Financila 1,391,800.00
d Revenue 2,608,200.00
e Interest Income for 2020 813,098.00

4 At the beginning of the current year, Juan company sold a machine and immediately leased it back at market rental.

The details of sale and leaseback are as follows

Sales Price ₱7,000,000.00

Fair value of the machine 7,500,000.00
Carrying amount of the machine 5,000,000.00
Annual rental Payable at the beginning of each year 700,000.00
Remaining life of the machine 10 years
Lease term 6 years
Implicit Interest rate 12%

PV of annuity in advance at 12% for 6 years 4.6048

a Compute the initial measurement of lease liability 3,223,360.00

b Compute the cost of right of use of the asset 2,482,240.00
c Determine the gain on right transferred 1,258,880.00
1 of each year as shown in the following

ialized machine for P5,000,000.00 cash.

Gross Investment ₱7,212,256.23

Net Investment 5,000,000.00
Unearned Interest Income ₱2,212,256.23

PV of the annual Payments ₱1,118,709.37 4.2305

PV of the RV 500,000.00 0.5346

Date Payment Interest

01.01.2020
12.31.2020 ₱1,118,709.37 ₱550,000.00
12.31.2021 1,118,709.37 487,441.97
12.31.2022 1,118,709.37 418,002.55
12.31.2023 1,118,709.37 340,924.80
12.31.2024 1,118,709.37 255,368.50
12.31.2025 1,618,709.37 160,401.01

LEASE). In 2020, Reagan Company completed

Gross Investment ₱10,000,000.00

Net Investment 7,391,800.00
UII ₱2,608,200.00
 Sales ₱7,391,800.00
Cost of Sales 6,000,000.00
GP ₱1,391,800.00

iately leased it back at market rental.

Lease Liability 3,223,360.00

2,482,240.00

Cash ₱6,300,000.00
Right of Use asset 2,482,240.00
Equipment ₱5,000,000.00
Lease Liability 2,523,360.00
Gain 1,258,880.00
 ₱4,732,700.00
267,300.00
₱5,000,000.00

Principal CA
₱5,000,000.00
₱568,709.37 4,431,290.63
631,267.40 3,800,023.22
700,706.82 3,099,316.41
777,784.57 2,321,531.84
863,340.87 1,458,190.97
1,458,308.37 (117.40)