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To raise operating funds, Pepero Company sold its equipment on March 31, 2019 for P470,000 and immediately leased the equipment back. The fair value of the asset is P700,000 and the equipment has a carrying value of P650,000. The annual rental payments of P100,000 is significantly lower than the fair rental of P125,000 for this type of equipment. Lease term is 12 years out of total life of 25 years. How much loss should be deferred beyond 2019 as a result of this leaseback transaction? A. P11,250 B. P168,750 C. P180,000 D. P52,500

To raise operating funds, Pepero Company sold its equipment on March 31, 2019 for P470,000 and immediately leased the equipment back. The fair value of the asset is P700,000 and the equipment has a carrying value of P650,000. The annual rental payments of P100,000 is significantly lower than the fair rental of P125,000 for this type of equipment. Lease term is 12 years out of total life of 25 years. How much loss should be deferred beyond 2019 as a result of this leaseback transaction? A. P11,250 B. P168,750 C. P180,000 D. P52,500

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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To raise operating funds, Pepero Company sold its equipment on March
31, 2019 for P470,000 and immediately leased the equipment back. The
fair value of the asset is P700,000 and the equipment has a carrying value
of P650,000. The annual rental payments of P100,000 is significantly
lower than the fair rental of P125,000 for this type of equipment. Lease
term is 12 years out of total life of 25 years. How much loss should be
deferred beyond 2019 as a result of this leaseback transaction?

A. P11,250
B. P168,750
C. P180,000
D. P52,500

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