An entity leased a machinery with useful life of 10 years on January 1, 2020 for period of 8 years with fixed annual rental of P800,000 which is to be paid at the end of each year. The lease contract provides that the lessee has the option to purchase the leased asset at the end of the lease term by paying P50,000. The estimated residual value of the leased asset at the end of its useful life is P150,000. The lessee is reasonably certain to exercise the bargain purchase option. The implicit interest rate in the lease is 12% and the incremental borrowing rate is 10%. REQUIRED: Prepare table of amortization and journal entries for the entire lease term.
An entity leased a machinery with useful life of 10 years on January 1, 2020 for period of 8 years with fixed annual rental of P800,000 which is to be paid at the end of each year. The lease contract provides that the lessee has the option to purchase the leased asset at the end of the lease term by paying P50,000. The estimated residual value of the leased asset at the end of its useful life is P150,000. The lessee is reasonably certain to exercise the bargain purchase option. The implicit interest rate in the lease is 12% and the incremental borrowing rate is 10%. REQUIRED: Prepare table of amortization and journal entries for the entire lease term.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
An entity leased a machinery with useful life of 10 years on January 1, 2020 for period of 8 years with fixed annual rental of P800,000
which is to be paid at the end of each year. The lease contract provides that the lessee has the option to purchase the leased asset at
the end of the lease term by paying P50,000. The estimated residual value of the leased asset at the end of its useful life is P150,000.
The lessee is reasonably certain to exercise the bargain purchase option. The implicit interest rate in the lease is 12% and the
incremental borrowing rate is 10%. REQUIRED: Prepare table of amortization and
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 10 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education