Happy Company leased a piece of equipment to Great Company on April 1, 2021. The lease is appropriately recorded as a sale by Happy. The lease is for an 8-year period ending March 31, 2029. The first of 8 equal annual payments of P175,000 (excluding executory costs) was made on April 1, 2021. The cost of the equipment to Happy is P940,000. The equipment has an estimated useful life of 10 years with a guaranteed residual value of P100,000. At the end of the lease term, the leased equipment reverts to Happy Company. The interest rate implicit in the lease is 10%.
Happy Company leased a piece of equipment to Great Company on April 1, 2021. The lease is appropriately recorded as a sale by Happy. The lease is for an 8-year period ending March 31, 2029. The first of 8 equal annual payments of P175,000 (excluding executory costs) was made on April 1, 2021. The cost of the equipment to Happy is P940,000. The equipment has an estimated useful life of 10 years with a guaranteed residual value of P100,000. At the end of the lease term, the leased equipment reverts to Happy Company. The interest rate implicit in the lease is 10%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Happy Company leased a piece of equipment to Great Company on April 1, 2021. The lease is appropriately recorded as a sale by Happy. The lease is for an 8-year period ending March 31, 2029. The first of 8 equal annual payments of P175,000 (excluding executory costs) was made on April 1, 2021.
The cost of the equipment to Happy is P940,000. The equipment has an estimated useful life of 10 years with a guaranteed residual value of P100,000. At the end of the lease term, the leased equipment reverts to Happy Company. The interest rate implicit in the lease is 10%.
How much is the total financial revenue (interest revenue) over the lease term? (Use four decimal places)
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