1. What would be the new lease receivable on the part of Haciendero Company?

Lease Receivable ₱ 6,000,000.00

2. From Haciendero Company, how much is the gross investment in the lease?

Gross Lease payments (1,750,000 x 5) ₱ 8,750,000.00

Unguaranteed residual value 275,000
Gross Investment ₱ 9,025,000.00

3. Based on Haciendero Company, what is the total unearned interest income and
how much is the interest income for the current year?

Gross Investment ₱ 9,025,000.00

Net Investment - Cost of the Asset -6,000,000
Unearned Interest Income ₱ 3,025,000.00

Lease Receivable ₱ 6,000,000.00

Multiply by: Interest rate 15%
Interest Income for the Current year ₱ 900,000.00

4. What amount should be reported as gross profit on sale for the current year?

Sale Price ₱ 14,875,000.00

Cost of Sales -8,500,000
Initial Direct Cost -500,000
Gross Profit on sale ₱ 5,875,000.00

What is the unearned interest income at the beginning of the current year?

Gross Rentals (2,500,000 x 10) ₱ 25,000,000.00

Less: Present value of rentals - equal to the sale price -14,875,000
Unearned Interest Income ₱ 10,125,000.00

What is the interest income for the current year?

Present value of rentals ₱ 14,875,000.00

Less: Advance rental payment -2,500,000
Leese Receivable ₱ 12,375,000.00

Interest Income (12,375,000 x 14%) ₱ 1,732,500.00

5. What is the initial lease liability?

Lease Liability (600,000 x 3.037) ₱ 1,822,200.00

What is the gain on right transferred to buyer-lessor?

Present value of lease liability

Additional financing equal to excess sale price (9,000,000 - 8,000,000)
Present value of lease liability related to rentals

Cost of right of use asset (822,200 / 8,000,000 x 7,200,000)

What is the gain on right transferred to buyer-lessor?

Cash ₱ 9,000,000.00
Right of Use Asset 739,980
Building ₱ 7,200,000.00
Lease Liabiliy 1,822,200
Gain on Rights Transferred 717,780

What is the annual rental income of buyer-lessor?

Fraction Allocation
822,200 822,200/1,822,200 270,000
1,000,000 1,000,000/1,822,200 329,272
1,822,200 600,000
₱ 1,822,200.00
-1,000,000
₱ 822,200.00

₱ 739,980.00