12. Louis Company leased amachine from MillenniumCorporation on January 1, 2010.The first annual payment wasmade on January 1, 2011. Themachine has an economic lifeof six years. The leaseagreement requires four annualpayments of P33,000,including P3,000 annualpayment for repairs andmaintenance. The machine willbe returned to MillenniumCorporation at the end of thelease term and Louis Companyguarantees a residual value ofP5,000. Interest implicit in thelease is 10%, which is known toLouis. 13. Use the same informationgiven in MC No. 12 and assumethat on January 1, 2014, thelease payment included anamount of P5,000 forexceeding a limit for machineusage hours specified in thelease agreement. LouisCompany would account forthis charge as *a. an expense in its 2013 statementof comprehensive income.b. an expense in its 2014 statementof comprehensive income.O c. a reduction in the lease liabilityO d. additional executory costs

The answer for the multiple choice question and relevant explanation are presented hereunder :…

12. Louis Company leased a machine from Millennium Corporation on January 1, 2010. The first annual payment was made on January 1, 2011. The machine has an economic life of six years. The lease agreement requires four annual payments of P33,000,

12. Louis Company leased a machine from Millennium Corporation on January 1, 2010. The first annual payment was made on January 1, 2011. The machine has an economic life of six years. The lease agreement requires four annual payments of P33,000,

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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