On August 1, 2020, ABC Company leased a machine to XYZ company for six years requiring payments of P100,000 at the beginning of each lease year. The machine cost P470,000, which is the fair value at the inception of the lease. ABC company has the option to purchase the machine for P5,000 which is significantly lower than the expected fair value of the machine at lease expiration date. ABC company incurred an initial direct cost of P3,000. The interest rate implicit in the lease is 10%. ABC appropriately recorded the lease as a direct financing lease. How much total financial revenue would ABC Company earned over the term of the lease? * A O P125,000 O P130,000 O P132,000 O P135,000
On August 1, 2020, ABC Company leased a machine to XYZ company for six years requiring payments of P100,000 at the beginning of each lease year. The machine cost P470,000, which is the fair value at the inception of the lease. ABC company has the option to purchase the machine for P5,000 which is significantly lower than the expected fair value of the machine at lease expiration date. ABC company incurred an initial direct cost of P3,000. The interest rate implicit in the lease is 10%. ABC appropriately recorded the lease as a direct financing lease. How much total financial revenue would ABC Company earned over the term of the lease? * A O P125,000 O P130,000 O P132,000 O P135,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On August 1, 2020, ABC Company leased a machine to XYZ company for six years requiring
payments of P100,000 at the beginning of each lease year. The machine cost P470,000, which
is the fair value at the inception of the lease. ABC company has the option to purchase the
machine for P5,000 which is significantly lower than the expected fair value of the machine at
lease expiration date. ABC company incurred an initial direct cost of P3,000. The interest rate
implicit in the lease is 10%. ABC appropriately recorded the lease as a direct financing lease.
How much total financial revenue would ABC Company earned over the term of the
lease? *
O P125,000
O P130,000
O P132,000
O P135,000
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