1. On December 31, 2015, Bentong Company, a lessor, sold a machinery that it had
been leasing under a direct financing lease. On January 1, 2015 after receipt of the lease payment for the year, the following account balances were associated
with the lease:
Gross lease receivable 5,540,000
Unearned interest income 1,000,000
Present value of lease receivable 4,540,000
The interest rate implicit in the lease is 10. On December 31, 2015, Bentong Company sold the leased machinery to the lessee for P3,150,000 cash.
What is the loss on sale of machinery that should be recognized on December 31, 2015?
a. 1,700,000 c. 2,150,000
b. 1,754,000 d. 1,390,000
Answer is b
Solution: Interest income for 2015 10 x 4,540,000
454,000 Sale Price
3,150,000 Carrying amount of lease receivable
Lease receivable 5,450,000
Unearned interest income 1,000,000 – 454,000
546,000 4,904,000
Loss on sale of machinery 1,754,000
2. DU30 Company entered into a finance lease on January 1, 2015. A third party
guaranteed the residual value of the asset under the lease estimated to be P220,000 on January 1, 2020, the end of the lease term.
Annual lease payments are P200,000 dues each December 31, beginning December 31, 2015. The last payment is due December 31, 2019.
The remaining useful life of the asset was six years at the commencement of the
lease. Both the lessor and lessee used 10 as the interest rate. The PV of 1 at 10 for
5 periods is .62, and the PV of an ordinary annuity of 1 at 10 for 5 periods is 3.79.
What is the lease receivable of the lessor and lease liability of the lessee at the commencement of the lease?
Lease Receivable Lease Liability
a. 894,400 894,400
b. 758,000 758,000
c. 894,400 758,000
d. 758,000 894,000
Answer is c
Solution:
Lessor
Present value of rentals 200,000 x 3.79
758,000
Guaranteed residual value 220,000 x .62
136,400 Lease receivable
894,400
Lessee
Lease Liability 200,000 x 3;79 758,000
3. Kaleidoscope Company had an asset costing P3,912,500. The asset is leased on
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