Leases 331 December 30, 20x5, Entity A leased a new. machine from Cregg Corp. The following data relate to the lease transaction at the inception of the lease: Lease term 10 years Annual rental payable at the end of each lease year P100,000 12 years Useful life of machine 10% Implicit interest rate Fair value of the machine P700,000 The lease has no renewal option, and the possession of the machine reverts to Gregg when the lease terminates. At the inception of the lease, Entity A should record a lease liability of c. 630,000 d. 676,000 a. 0 b. 615,000 (AICPA) 5. On January 2, 20x6, Entity A entered into a ten-year non- cancellable lease requiring year-end payments of P100,000. Entity A's incremental borrowing rate is 12% while the lessor's implicit interest rate, known to Entity A, is 10%. Ownership of the property remains with the lessor at expiration of the lease. There is no bargain purchase option. The leased property has an estimated economic life of 12 years. What amount should Entity A capitalize for this leased property on January 2, 20x6? a. 1,000,000 b. 614,500 (AICPA) c. 565,000 d. 0 6. Entity A'entered into a nine-year finance lease on . December 31

Leases 331 December 30, 20x5, Entity A leased a new. machine from Cregg Corp. The following data relate to the lease transaction at the inception of the lease: Lease term 10 years Annual rental payable at the end of each lease year P100,000 12 years Useful life of machine 10% Implicit interest rate Fair value of the machine P700,000 The lease has no renewal option, and the possession of the machine reverts to Gregg when the lease terminates. At the inception of the lease, Entity A should record a lease liability of c. 630,000 d. 676,000 a. 0 b. 615,000 (AICPA) 5. On January 2, 20x6, Entity A entered into a ten-year non- cancellable lease requiring year-end payments of P100,000. Entity A's incremental borrowing rate is 12% while the lessor's implicit interest rate, known to Entity A, is 10%. Ownership of the property remains with the lessor at expiration of the lease. There is no bargain purchase option. The leased property has an estimated economic life of 12 years. What amount should Entity A capitalize for this leased property on January 2, 20x6? a. 1,000,000 b. 614,500 (AICPA) c. 565,000 d. 0 6. Entity A'entered into a nine-year finance lease on . December 31

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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