Interest Reduction Balance of payment Expense Liability Liablity 1/1/2020 985,150 12/31/2020 300,000 98,515 201,485 783,665 12/31/2021 300,000 78,366 221,634
Problem 10- 10
Troy Company prepared the following amortization schedule for the lease of a machine from another entity. The machine has an economic life of six years.
The lease agreement requires four annual payments of P330,000, including executory costs of P30,000, and the machine will be retured to the lessor at the end of the lease term.
Minimum lease Interest Reduction Balance of
payment Expense Liability Liablity
1/1/2020 985,150
12/31/2020 300,000 98,515 201,485 783,665
12/31/2021 300,000 78,366 221,634 562,031
12/31/2022 300,000 56,203 243,797 318,234
12/31/2023 300,000 31,766 268,234 50,000
Required:
- Prepare
journal entry to record the finance lease on Janury 1, 2020. - Prepare journal entry on December 31, 2020 to record the annual lease payment an dthe executory cost.
- Prepare journal entry to record the
depreciation for 2020. - Prepare journal entry to record the annual lease payment and the executory cost on December 31,2023.
- Prepare journal entry to record the return of the machine to the lessor. Assume the fair value is the same as the residual value guarantee.
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