Mihawk Company purchased an equipment on January 1, 2020 for P 3,000,000 cash for the purpose of leasing it. The machine is expected to have a 10-year life from the date of purchase. On April 1, 2020, the equipment was leased to Crocodile Company for a three-year period, at a monthly rental of P 40,000, payable at the end of every month. Additionally, Crocodile Company paid P 120,000 to Mihawk Company on April 1, 2020 as a lease bonus. Mihawk Company paid repairs of P 20,000 relating to 2020. Required: a. Prepare journal entries on the books of the lessee and lessor following the operating lease concept. b. Compute the rent income of the lessor for 2020.
Mihawk Company purchased an equipment on January 1, 2020 for P 3,000,000 cash for the purpose of leasing it. The machine is expected to have a 10-year life from the date of purchase. On April 1, 2020, the equipment was leased to Crocodile Company for a three-year period, at a monthly rental of P 40,000, payable at the end of every month. Additionally, Crocodile Company paid P 120,000 to Mihawk Company on April 1, 2020 as a lease bonus. Mihawk Company paid repairs of P 20,000 relating to 2020. Required: a. Prepare journal entries on the books of the lessee and lessor following the operating lease concept. b. Compute the rent income of the lessor for 2020.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 14RE: On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment....
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Mihawk Company purchased an equipment on January 1, 2020 for P 3,000,000 cash for the purpose of
leasing it. The machine is expected to have a 10-year life from the date of purchase.
On April 1, 2020, the equipment was leased to Crocodile Company for a three-year period, at a monthly rental
of P 40,000, payable at the end of every month.
Additionally, Crocodile Company paid P 120,000 to Mihawk Company on April 1, 2020 as a lease bonus.
Mihawk Company paid repairs of P 20,000 relating to 2020.
Required:
a. Prepare journal entries on the books of the lessee and lessor following the operating lease concept.
b. Compute the rent income of the lessor for 2020.
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