On January 1,2020, Cookie Company leased an equipment from Sydney Company for 8 years with annual lease payment of P100,000. First payment of P 100,000 was paid on January 1,2020 and subsequent payments are done every December 31, starting on December 31,2020. Also, based on the lease contract, the following are the terms and conditions: - The lease payment will increase every 2 years on the basis of the increase in the consumer price index for the next 2 years. - At the end of the lease term, there is a bargain purchase option of P 20,000. The implicit interest rate in the lease is 10%. At the commencement of the lease , the CPI is 110 and on January 1,2022, the CPI increase by 115.

On January 1,2020, Cookie Company leased an equipment from Sydney Company for 8 years with annual lease payment of P100,000. First payment of P 100,000 was paid on January 1,2020 and subsequent payments are done every December 31, starting on December 31,2020. Also, based on the lease contract, the following are the terms and conditions: - The lease payment will increase every 2 years on the basis of the increase in the consumer price index for the next 2 years. - At the end of the lease term, there is a bargain purchase option of P 20,000. The implicit interest rate in the lease is 10%. At the commencement of the lease , the CPI is 110 and on January 1,2022, the CPI increase by 115.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...

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Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
Use the information in RE20-3. Prepare the journal entries that Garvey Company would make in the first year of the lease assuming the lease is classified as a finance lease. However, assume that Garvey is now required to make the 65,949.37 payments on January 1 each year and that the fair value at the lease inception is now 275,000 (65,949:37 4:169865).
On June 30, 2024, Clark, Incorporated leased warehouse equipment from Woodward, Incorporated. The lease agreement calls for Clark to make semiannual lease payments of $700,000 over a 2-year lease term (also the asset's useful life), payable each June 30 and December 31, with the first payment on June 30, 2024. Clark's incremental borrowing rate is 10%, the same rate Woodward used to calculate lease payment amounts. Woodward manufactured the equipment at a cost of $2,220,000. Lease date Semi-annual payments Lease term Payments per year Equipment's cost Clark's incremental borrowing rate 1. Determine the price at which Woodward is 'selling' the equipment (present value of the lease payments) using Excel's PV function. 2. Prepare the journal entry to record the sale by Woodward Incorporated on June 30, 2024. Date General Journal Debit June 30, 2024 3. Prepare an amortization schedule for the 2-year term of the lease. Date June 30, 2024 December 31, 2024 June 30, 2025 December 31, 2025…
On January 1, 2021, Flackmon Company entered into a lease for a truck with a payment of S16,000 per year for 4 years. The expected life of the truck is 5 years, and the first payment will be made immediately. Flackmon could obtain a loan for a similar amount at a rate of 8% per year. Required: A. Record the lease liability and the first payment on January 1, 2021. B. Record the amortization on the leased asset for 2021. C. Record interest for 2021 on the lease. D. Record the lease payment on January 1, 2022. Your answers to this open-ended assignment should be placed in the space below this line. A Date Account Name Debit Credit Jan. 1, 2021 1-Jan-21 B Date Account Name Debit Credit Dec. 31, 2021 C Date Account Name Debit Credit Dec. 31, 2021 D Date Account Name Debit Credit Jan. 1, 2022
On December 31, 2020, Roe Company leased a machine from Colt Company for a five-year period Equal annual payments under the lease P1,050,000 including P50,000 annual executory cost and are due on December 31 of each year. The first payment was made on December 31, 2020, and the second payment was made on December 31, 2021. The five lease payments are discounted at 10% over the lease term. The present value of minimum lease payments at the inception of the lease and before the first annual payment was P4,170.000.On December 31, 2021, what amount should be reported as lease liability?
On March 1, 2020, Juvius Company entered into a lease contract for newly constructed warehouses and storage facilities. The contract contains the following information: Composite life of warehouses = 10 years Lease Term = 5 years Annual lease payment at the beginning of each lease year= Php 1,500,000 Annual payment for taxes 2020: Php 41,666.67 2021 – 2024: Php 50,000/year 2026: Php 8,333.33 Annual payment for insurance (good for 12 months, started at commencement date) = 100,000 Initial Direct Costs = 200,000 Implicit Rate: 8% Note: Executory costs are paid every December 31. Advance payments are treated as prepayments. The asset reverts to the owner at the end of the term. Required: All PV factors must be rounded off up to four decimal places but answers must be rounded off to two decimal places including journal entries. Assume calendar year period. Prepare related journal entries to record the transactions that transpire during the year 2020. Show necessary computations for…
On December 31, 2022, Sunland Corp. leased a machine from Eastern Star Ltd. for a five-year period. Annual lease payments are $318000 (including $14000 annual executory costs), due on December 31 each year. The first payment was made on December 31, 2022, and the second payment on December 31, 2023. The appropriate interest rate for this type of lease is 10%. The present value of the minimum lease payments at the inception of the lease (before the first payment) was $1267680. The lease is being accounted for as a finance lease by Sunland. On its December 31, 2023 statement of financial position, Sunland should report a lease liability of O $207632. Ⓒ$756048. O $963680. O $96368.
On January 1, 2018, This Co. leased an asset with fair value of P800,000 from Joyce Co. for a lease term of 6 years. The lease specifies equal annual payments beginning on January 1, 2018. The lessee guarantees a P100,000 residual value of the asset at the end of the lease term. The rate implicit on the lease is 9%. How much is the annual lease payment?
On December 31, 2021, Rafferty Company leased equipment under a finance lease. Annual lease payments of P200,000 are due December 31 for 10 years. The useful life of the equipment is 10 years, and the interest rate implicit in the lease is 10%. The finance lease obligation was recorded onDecember 31, 2021, at P1,350,000, and the first lease payment was made on that date. Question: What amount should be includedc in current liabilities on December 31, 2021 in relation to the lease? A. 65,000 B. 85,000 C. 115,000 D. 200,000
On January 1, 2020, Tsaritza Co. (lessee) entered into a contract of lease with Snezhnaya Co. (lessor) that allows Tsaritza the right to use machinery for 5 years. The machinery had a useful life of 4 years.The following terms were agreed on January 1, 2020:• P500,000 annual rental every December 31 of the year starting 2020 for 5 payments in total.• Implicit rate of of the lease was 10%.• Tsaritza’s incremental borrowing rate on agreement date was 12%.• Tsaritza will guaranteed that at the expiration of the lease term the residual value of the asset will be at P300,000.• Initial direct cost paid by Tsaritza were P200,000.• Lease incentives amounted to P50,000.On December 31, 2024, the machinery had a fair value of P200,000, Tsaritza Co returned the leased asset and settled with Snezhnaya Co. (use 4 decimal places for PV factors)Requirements: (round off any peso value to the nearest one peso to eliminate centavos, if any)a. What amount of lease liability will be recorded by Tsaritza on…
On January 1, 2021, Nets Company entered into a lease contract with Denver Company for a new equipment that had a selling price of P2,120,000. The lease contract provides that annual lease payments of P420,000 will be made for 6 years. Nets made the first payment on January 1, 2021, subsequent payments are made on December 31 of each year. Nets guarantees a residual value of P367,122 at the end of the lease term. After considering the guaranteed residual value, the rate implicit in the lease is determined to be 12%. Nets has an incremental borrowing rate of 15%. The economic life of the equipment is 9 years. Nets depreciates its equipment using the straight line method. 1. The non-current portion of the lease liability as of December 31, 2022 is: 2. The carrying amount of the equipment as of December 31, 2023 is:
An asset with a market value of P1,000,000 is leased on January 1, 2019. Five annual lease payments are due each December 31 beginning December 31, 2019. The guaranteed residual value on December 31, 2023, the last day of the lease term, is P400,000. The lessor's implicit interest rate is 8%. What is the annual lease payment? A. P200,000 B. P182,456 C. P168,910 D. P120,000