10. On January 2, 20x8, Cole Co. signed an noncancelable lease for a new machine, requiring P15,000 annual payments at the beginning of each year. The machine has a useful life of 12 years, with no salvage value. Title passes to Cole at the lease expiration date. Cole uses straight-line depreciation for all of its plant assets. Aggregate lease payments have a present value on January 2, 20x8, of P108,000, based on an appropriate rate of interest. For 20x8, Cole should record depreciation (amortization) expense for the leased eight-year machine at a. 0 b. 9,000 с. 13,500 d. 15,000 PA)

10. On January 2, 20x8, Cole Co. signed an noncancelable lease for a new machine, requiring P15,000 annual payments at the beginning of each year. The machine has a useful life of 12 years, with no salvage value. Title passes to Cole at the lease expiration date. Cole uses straight-line depreciation for all of its plant assets. Aggregate lease payments have a present value on January 2, 20x8, of P108,000, based on an appropriate rate of interest. For 20x8, Cole should record depreciation (amortization) expense for the leased eight-year machine at a. 0 b. 9,000 с. 13,500 d. 15,000 PA)

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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14. The following relate to an operating lease agreement: The lease term is three years, beginning January 1, 2024. The leased asset cost the lessor $840,000 and had a useful life of eight years with no residual value. The lessor uses straight-line depreciation for its depreciable assets. Annual lease payments at the beginning of each year were $143,000. Incremental costs of negotiating and consummating the completed lease transaction incurred by the lessor were $3,000. Record the following 13 entries: 1. 01.01.2024 Record the cash received. 2. 01.01.2024 Record the payment of initial direct costs. 3. 12.31.2024 Record the cost of the lease. 4. 12.31.2024 Record the depreciation. 5. 12.31.2024 Record the lease revenue. 6. 01.01.2025 Record the cash received. 7. 12.31.2025 Record the cost of the lease. 8. 12.31.2025 Record the depreciation. 9. 12.31.2025 Record the lease revenue. 10. 01.01.2026 Record the cash received. 11. 12.31.2026 Record the cost of the lease. 12.…
On January 2, 2019, CanonCompany signed an 8-year non-cancellable lease for a new machine, requiring P120,000 annual payments at the beginning of each year. The machine has an estimated life of 12 years, with no salvage value. Title passes to Canon at the lease expiration date. Canon uses straight-line method of depreciation for all of its plant asses. Aggregate lease payments have a present value on January 2, 2017, of P864,000 based on an appropriate rate of interest. For 2018, how much should Canon record as depreciation expense for the leased machine?
19. KAPIT LANG CEREBELLUM leased a new machine to MALAPIT NA ANG FINISH LINE on January 01, 2012. The lease expires on January 01, 2017. Annual rental is P900,000. Additionally, on January 01, 2012, MALAPIT NA ANG FINISH LINE paid P500,000 to KAPIT LANG CEREBELLUM as a lease bonus and P250,000 as a security deposit to be refunded upon expiration of the lease. In KAPIT LANG CEREBELLUM's 2012 statement of comprehensive income, the amount of rental revenue should be a. P1,400,000 b. P1,250,000 c. P1,000,000 d. P900,000
On 31 December 20X0, Columbia Inc. entered into an agreement with Scotia Ltd. to lease equipment with a useful life of 6 years. Columbia Inc. will make four equal payments of $132,000 at the beginning of each lease year. Columbia Inc. anticipates that the equipment will have a residual value of $90, 400 at the end of the lease, net of removal costs. Columbia Inc. has the option of extending the lease by (1) paying $90, 400 to retain the equipment or (2) allowing Scotia Ltd. to remove it. Scotia Ltd. 's implicit interest rate in this lease is 6% . Columbia Inc.'s incremental borrowing rate is 7% . Columbia Inc. depreciates the leased equipment on a straight-line basis. The lease commences on 1 January 20X1. Assume that the fair value of the equipment on the open market is greater than the present value of the lease payments. (PV of $1, PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare a lease liability amortization table for this…
1. What amount should be recorded initially as cost of the right of use asset? 2. What is the annual depreciation of the right of use asset?
(Lessor Computations and Entries, Sales-Type Lease with Unguaranteed Residual Value) George Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $278,072, and its unguaranteed residual value at the end of the lease term is estimated to be $20,000. National will pay annual payments of $40,000 at the beginning of each year and all maintenance, insurance, and taxes. George incurred costs of $180,000 in manufacturing the equipment and $4,000 in negotiating and closing the lease. George has determined that the collectibility of the lease payments is reasonably predictable,that no additional costs will be incurred, and that the implicit interest rate is 10%.Instructions(a) Discuss the nature of this lease in relation to the lessor and compute the amount of each of the following items.(1) Lease receivable.(2) Sales price.(3) Cost of sales.(b) Prepare a 10-year…
At the beginning of current year, Jimbie Company, as lessor, leased an equipment for ten years at an annual rental of P 1,200,000, payable by Buggy Company, the lessee, at the beginning of each year. The lease is appropriately accounted for as finance lease. The equipment had a cost of P 8,400,000 with an estimated life of 12 years and no residual value. The straight line depreciation is used. The implicit rate is 9%. What amount of interest income should be reported in the income statement for the current year? Show your solution.
10. On 1 July 2008, Copper Coin Ltd leased a photocopier from Silver Note Corp., a company that manufactures, retails and lease copiers. The photocopier has cost Silver Note Corp. $30,000 to make but had a fair value on 1 July 2008 of $35,080. The lease agreement contained the following provisions: Lease term 3 years Annual payment, payable in advance on 1 July each year $ 14,500 Economic life of the copier 4 years Estimated residual value at the end of the lease term when the $3,000 copier is returned to Silver Note Corp. Residual value guaranteed by Copper Coin $ 1,500 Interest rate implicit in the lease 10% The lease is cancellable, provided another lease is immediately entered into. The annual payment included an amount of $2,500 p.a. to reimburse Silver Note Corp. for the cost of paper and toner supplied to Copper Coin Ltd. Silver Note Corp.'s solicitor prepared the lease agreement for a fee of $1,365. On 30 June2011, at the end of the lease term, Copper Coin Ltd retuned the…
At the beginning of 2024, VHF Industries acquired a machine with a fair value of $6,000,000 by signing a four-year lease, which is the expected useful life of the machine passing. The lease is payable in four annual payments of $1,892,825 at the end of each year. (FV of $1, PV of $1, FVA of $1. PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What is the effective rate of interest implicit in the agreement? 2-4. Prepare the lessee's journal entries at the inception of the lease, the first lease payment at December 31, 2024 and the second lease payment at December 31, 2025. 5. Suppose the fair value of the machine and the lessor's implicit rate were unknown at the time of the lease, but that the lessee's incremental borrowing rate of interest for notes of similar risk was 11%. Prepare the lessee's journal entries for 2024. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Req 5 Suppose the fair…