2. On January 1, 20x1, Noon, Inc. enters into a 3-year lease of a machine for an annual rent of P200,000 payable at the end of each year. The machine has a remaining useful life of 5 years. The interest rate implicit in the lease is 10%, while Noon Inc.'s incremental borrowing rate is 12%. Noon, Inc. uses the straight-line method of depreciation.

2. On January 1, 20x1, Noon, Inc. enters into a 3-year lease of a machine for an annual rent of P200,000 payable at the end of each year. The machine has a remaining useful life of 5 years. The interest rate implicit in the lease is 10%, while Noon Inc.'s incremental borrowing rate is 12%. Noon, Inc. uses the straight-line method of depreciation.

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

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

lease liability (show current and noncurrent portions) and (ii)
2. On January 1, 20x1, Noon, Inc. enters into a 3-year lease of a
machine for an annual rent of P200,000 payable at the end of
each year. The machine has a remaining useful life of 5 years.
The interest rate implicit in the lease is 10%, while Noon Inc' s
incremental borrowing rate is 12%. Noon, Inc. uses the
b. Determine the December 31, 20x1 carrying amounts of the (i)
straight-line method of depreciation.
Requirements:
a. Provide the journal entries in 20x1 and 20x2.
lease liability (show current and noncurrent portions) ane
right-of-use asset.

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