Murata Enterprises has a long-standing policy of acquiring company equipment by leasing. Early in 2020, the company entered into a lease for a new equipment. The lease stipulates that annual payments will be made for 5 years. The payments are to be made in advance on January 1 of each year. At the end of the 5 - year period, Murata may purchase the equipment. The estimated economic life of the equipment is 12 years. Murata uses the calendar year for reporting purposes and straightline depreciation for other equipment. In addition, the following information about the lease is also available: Annual lease payments P65,000 Purchase option, (reasonably certain to be exercised) 25,000 Estimated fair value of equipment after 5 years 75,000 Implicit rate (use 4 decimal places for PV factors) 10% Date of first lease payment Jan. 1, 2020 Requirements: (round off any peso value to the nearest one peso to eliminate centavos, if any) 1. What amount of lease liability will be recorded by Vernon on January 1, 2020? 2. Prepare the 2020 journal entries relating to the lease on the books of Murata (Round off present value factors to four decimal places, round off all peso values to the nearest one peso). 3. What amount of right-of-use asset will be presented in the books of Murata on December 31, 2020
Murata Enterprises has a long-standing policy of acquiring company equipment by leasing. Early in
2020, the company entered into a lease for a new equipment. The lease stipulates that annual
payments will be made for 5 years. The payments are to be made in advance on January 1 of each
year. At the end of the 5 - year period, Murata may purchase the equipment. The estimated economic
life of the equipment is 12 years. Murata uses the calendar year for reporting purposes and straightline depreciation for other equipment. In addition, the following information about the lease is also
available:
Annual lease payments P65,000
Purchase option, (reasonably certain to be exercised) 25,000
Estimated fair value of equipment after 5 years 75,000
Implicit rate (use 4 decimal places for PV factors) 10%
Date of first lease payment Jan. 1, 2020
Requirements: (round off any peso value to the nearest one peso to eliminate centavos, if any)
1. What amount of lease liability will be recorded by Vernon on January 1, 2020?
2. Prepare the 2020
value factors to four decimal places, round off all peso values to the nearest one peso).
3. What amount of right-of-use asset will be presented in the books of Murata on December 31,
2020
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