1. Tecson Company leased equipment to Trinidad Company on January 1, 2020.

The lease is for an eight-year period expiring December 31, 2026. The first of
eight annual payments of P900,000 was made on January 1, 2020. The entity
had purchased the equipment on December 29, 2019 for P4,800,000. The
lease is appropriately accounted for as a sales type lease. The present value
on January 1, 2020 of all rent payments over the lease term discounted at a
10% interest rate was P5,280,000. What is the gross profit on sale for 2020?

SOLUTION:
Present value of rentals – sales revenue 5,280,000
Cost of sales (4,800,000)
Gross profit on sale 480,000