. Jackie Chan Leasing signs an equipment lease contract with Chris Tucker on January 1, 2022. The following information pertains to the lease. Lease term - 5 years Equipment's useful life - 6 years Bargain option price - P40,000 Implicit rate, known by Chris Tucker - 10% Fair value of the asset at January 1, 2022 - P600,000 Estimated recoverable value at the end of 5 years - P80,000 Estimated residual value at the end of 6 years - P20,000 The cost of the asset to Jackie Chan Leasing is P600,000. Chris Tucker uses the sum-of-the years' digit method to depreciate this type of equipment. Annual lease payments are made at the beginning of each year, starting January 1, 2022. REQUIRED: (a) Tucker for years 2022 and 2023 as a result Give the entries in the books of Chris of the lease contract. (b) Give the entries in the books of Jackie Chan Leasing for years 2022 and 2023.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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7. Jackie Chan Leasing signs an equipment
lease contract with Chris Tucker on January
1, 2022. The following information pertains
to the lease.
Lease term - 5 years
Equipment's useful life - 6 years
Bargain option price - P40,000
Implicit rate, known by Chris Tucker - 10%
Fair value of the asset at January 1, 2022 -
P600,000
Estimated recoverable value at the end of 5
years - P80,000
Estimated residual value at the end of 6
years - P20,000
The cost of the asset to Jackie Chan
Leasing is P600,000. Chris Tucker uses the
sum-of-the years' digit method to depreciate
this type of equipment. Annual lease
payments are made at the beginning of each
year, starting January 1, 2022.
REQUIRED:
(a) Give the entries in the books of Chris
Tucker for years 2022 and 2023 as a result
of the lease contract.
(b) Give the entries in the books of Jackie
Chan Leasing for years 2022 and 2023.
Transcribed Image Text:7. Jackie Chan Leasing signs an equipment lease contract with Chris Tucker on January 1, 2022. The following information pertains to the lease. Lease term - 5 years Equipment's useful life - 6 years Bargain option price - P40,000 Implicit rate, known by Chris Tucker - 10% Fair value of the asset at January 1, 2022 - P600,000 Estimated recoverable value at the end of 5 years - P80,000 Estimated residual value at the end of 6 years - P20,000 The cost of the asset to Jackie Chan Leasing is P600,000. Chris Tucker uses the sum-of-the years' digit method to depreciate this type of equipment. Annual lease payments are made at the beginning of each year, starting January 1, 2022. REQUIRED: (a) Give the entries in the books of Chris Tucker for years 2022 and 2023 as a result of the lease contract. (b) Give the entries in the books of Jackie Chan Leasing for years 2022 and 2023.
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