On December 31, 2020, Cleeneth Company leased equipment under a finance lease. Annual lease payments of P400,000 are due December 31 for 10 years. The equipment's useful life is 10 years, and the interest rate implicit in the lease is 10%. The lease obligation was recorded on December 31, 2020 at P2,700,000 and the first lease payment was made on that date. What amount should Cleeneth Company include in current liabilities in relation to the finance

On December 31, 2020, Cleeneth Company leased equipment under a finance lease. Annual lease payments of P400,000 are due December 31 for 10 years. The equipment's useful life is 10 years, and the interest rate implicit in the lease is 10%. The lease obligation was recorded on December 31, 2020 at P2,700,000 and the first lease payment was made on that date. What amount should Cleeneth Company include in current liabilities in relation to the finance

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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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

On December 31, 2020, Cleeneth Company leased equipment under a finance lease. Annual
lease payments of P400,000 are due December 31 for 10 years. The equipment's useful life
is 10 years, and the interest rate implicit in the lease is 10%. The lease obligation was recorded
on December 31, 2020 at P2,700,000 and the first lease payment was made on that date.
What amount should Cleeneth Company include in current liabilities in relation to the finance
lease in its December 31, 2020 statement of financial position?

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