What the gross lease receivables account balance should be

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Question 1. On August 1, 2015, Gabriel Company leased a machine to Way Company for a six-year period requiring payments of P100,000 at the beginning of each year. The machine cost P480,000, which is the fair value at the lease date, and has a useful life of eight years with no residual value. Gabriel appropriately recorded the lease as a direct financing lease. Gabriel's implicit interest rate is 10% and present value factors are as follows:

PV of an annuity due of P1 at 10% for 6 periods 4.800

PV of an annuity due of P1 at 10% for 8 periods 5.868

At the inception of the lease, the gross lease receivables account balance should be

a. P 600,000

b. P 586,800

c. P 480,000

d. P 479,100

Question 2. Use the same information given in 1. How much is the interest revenue relating to the lease for the year ended December 31, 2015?

a. P 48,000

b. P 35,417

c. P 25,000

d. P 15,833

Reference no: EM132575839

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