8 Rapp Co. leased a new machine to Lake Co. on January 1, 20x1. The lease expires on January 1, 20x6. The annual rental is P90,000. Additionally, on January 1, 20x1, Lake paid P50,000 to Rapp as a lease bonus and P25,000 as a security deposit to be refunded upon expiration of the lease. In Rapp's 20x4 income statement, the amount of rental revenue should be a. 140,000 b. 125,000 c. 100,000 d. 90,000 LAICRA)

8 Rapp Co. leased a new machine to Lake Co. on January 1, 20x1. The lease expires on January 1, 20x6. The annual rental is P90,000. Additionally, on January 1, 20x1, Lake paid P50,000 to Rapp as a lease bonus and P25,000 as a security deposit to be refunded upon expiration of the lease. In Rapp's 20x4 income statement, the amount of rental revenue should be a. 140,000 b. 125,000 c. 100,000 d. 90,000 LAICRA)

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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On 1 January 1, 20x9 Brix Co entered into an agreement to lease a machine that had an estimated life of five years. The lease period is also four years at which point the asset will be returned to the leasing company. Brix Co is required to pay for all maintenance and insurance costs relating to the asset. Annual rentals of $10,000 are payable in advance from January 1, 20x9. The machine is expected to have a nil residual value at the end of its life. The machine had a fair value of $35,000 at the inception of the lease. The lessor includes a finance cost of 10% per annum when calculating annual rentals. a) How should the lease be accounted for in the financial statements of Shrub for the year end 31 December 20x9? b) Record the journal entries for the lease…
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