CASE B: Assuming that the residual value is not guaranteed by RememberMe Company.1. How much is the annual lease payment?2. How much is the total balance of finance lease obligation (lessee) andnet finance lease receivable (lessor) at December 31, 2021?3.How much is the total interest expense interest income recognized byCoco Corporation in its statement of comprehensive income for theperiod ending December 31, 2021? Case 2Coco Corporation had the following lease transactions during the periodunder audit. You ascertained that Coco's accountant classified thefollowing lease as operating lease. The details of the lease agreement weresummarized below. Your audit investigation revealed that asset for leasedare not considered as low value assets nor the lease term as not short termlease.Lease of equipmentCoco Corporation manufactures specialized equipment and offers leasingalternative to its customer who do not have the necessary funds orfinancing available for outright purchase. The data relative to a typical leaseoffered to Remember Me Company are as follows:a. The lease is initiated on January 1, 2021. Payments are due on everyDecember 31 for the duration of the lease term.b. The non-cancelable fixed portion of the lease terin is 5 years. Thelessee has the option to renew the lease for an additional 3 years forthe same rental. The estimated useful life of the asset is 10 years. Thelessor desires a return of 12 percent. (Implicit rate).c. The lessor is to receive equal annual payments over the term of thelease and the leased property's title is to be transferred to the lessee atthe end of lease term.d. The selling price of the equipment for an outright purchase isP1,707,263. The cost of the equipment to Coco is P1,250,000. Thelessor incurs costs associated with the inception of the lease in theamount of P55,000.e.The equipment is expected to have residual value of P150,000 at theend of 5 years and P100,000 at the end of 8 years.f.It is not reasonably certain that the lease will be extended for additional3 year period.

The annual lease payments is calculated by dividing the difference between the Present value i.e.…

CASE B: Assuming that the residual value is not guaranteed by Remember Me Company. 1. How much is the annual lease payment? 2. How much is the total balance of finance lease obligation (lessee) and net finance lease receivable (lessor) at December 31, 2021? 3. How much is the total interest expense interest income recognized by Coco Corporation in its statement of comprehensive income for the period ending December 31, 2021?

CASE B: Assuming that the residual value is not guaranteed by Remember Me Company. 1. How much is the annual lease payment? 2. How much is the total balance of finance lease obligation (lessee) and net finance lease receivable (lessor) at December 31, 2021? 3. How much is the total interest expense interest income recognized by Coco Corporation in its statement of comprehensive income for the period ending December 31, 2021?

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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am. 127.