10. On January 1, 2012, Thelma Industries leased equipment to Tricia Company for a four- year period ending December 31, 2015. The equipment cost Thelma P300,000 and has an expected useful life of five years. Annual payments are P118,951, including P10,000 executory costs. The equipment's fair value is P400,000. The lessee guarantees the residual value of P80,000. Lease payment is due every December 31 and Tricia made the first payment on December 31, 2012. Thelma incurred P15,000 costs contract. The rate implicit in the lease after adjustments for the costs incurred by Thelma is 10%. Present value of 1

10. On January 1, 2012, Thelma Industries leased equipment to Tricia Company for a four- year period ending December 31, 2015. The equipment cost Thelma P300,000 and has an expected useful life of five years. Annual payments are P118,951, including P10,000 executory costs. The equipment's fair value is P400,000. The lessee guarantees the residual value of P80,000. Lease payment is due every December 31 and Tricia made the first payment on December 31, 2012. Thelma incurred P15,000 costs contract. The rate implicit in the lease after adjustments for the costs incurred by Thelma is 10%. Present value of 1

Name: 10. On January 1, 2012, ThelmaIndustries leased equipmentto Tricia Co
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Description: 10. On January 1, 2012, ThelmaIndustries leased equipmentto Tricia Company for a four-year period ending December31, 2015. The equipment costThelma P300,000 and has anexpected useful life of fiveyears. Annual payments areP118,951, including P10,000e

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

10. On January 1, 2012, Thelma
Industries leased equipment
to Tricia Company for a four-
year period ending December
31, 2015. The equipment cost
Thelma P300,000 and has an
expected useful life of five
years. Annual payments are
P118,951, including P10,000
executory costs. The
equipment's fair value is
P400,000. The lessee
guarantees the residual value
of P80,000. Lease payment is
due every December 31 and
Tricia made the first payment
on December 31, 2012. Thelma
incurred P15,000 costs
contract. The rate implicit in
the lease after adjustments for
the costs incurred by Thelma is
10%. Present value of 1
discounted at 10% for 4
periods is 0.68301. Present
value of annuity due of 1 for 4
periods discounted at 10% is
3.48685. Present value of
ordinary annuity of 1 at 10% for
4 periods is 3.16987. How much
profit, inclusive of interest
revenue, should Thelma report
from this lease for the year
ended December 31, 2012? *
a. P100,000
b. P125,000
c. P140,000
d. P162,991

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