On December 31, 2020, Naruto Company leased a new machine from Sasuke with the following pertinent information: Lease term 6 years Annual rental payable in beginning of each year 500,000 Useful life of machine 8 years Implicit interest rate in lease 12% Present value of an annuity of 1 in advance for 6 periods at 12% 4.60 Present value of an ordinary annuity of 1 for 6 periods at 12% 4.11 The lease is not renewable, and the machine reverts to Sasuke at the termination of the lease. The cost of the machine on Sasuke’s accounting records is P3,755,000. At the beginning of the lease term, Naruto should record a lease liability of

On December 31, 2020, Naruto Company leased a new machine from Sasuke with the following pertinent information: Lease term 6 years Annual rental payable in beginning of each year 500,000 Useful life of machine 8 years Implicit interest rate in lease 12% Present value of an annuity of 1 in advance for 6 periods at 12% 4.60 Present value of an ordinary annuity of 1 for 6 periods at 12% 4.11 The lease is not renewable, and the machine reverts to Sasuke at the termination of the lease. The cost of the machine on Sasuke’s accounting records is P3,755,000. At the beginning of the lease term, Naruto should record a lease liability of

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

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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On January 1, 2020, Naruto Company leased a new machine from Sasuke Company. The following data relate to the lease transaction at the inception of the lease: Lease term 5 years Annual rental payable at beginning of each lease year 500,000 Useful life of machine 10 years Implicit interest rate 10% Present value of an annuity of 1 in advance for 5 periods at 10% 4.17 Present value of annuity of 1 in arrears for 5 periods at 10% 3.79 Fair value of the machine 2,500,000 The lease has no renewal option and the possession of the machine reverts to Sasuke when the lease terminates. At the inception of the lease, Naruto should record a lease liability of
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North Blue Company leased a new copier from Kixko Company on June 1, 2019, under a lease with the following information: Lease term 10 years Annual rental payable at the beginning of each lease year $45,000 Useful Life of machine 10 years Implicit interest rate 12% Present value factor for an annuity of 1 in advance for 10 periods at 12% 6.3282 Present Value factor for 1 for 10 periods at 12% 0.32197 North Blue has the option to purchase a machine on June 1, 2023, by paying $75,000, which approximates the fair value of the machine on the option exercise date. On May 1, 2019, North Blue should record a right-of-use asset in the amount of a.$284,769. b.$292,991. c.$450,000. d.$276,548.
On January 1, 2020, Petty Company leased a machine with the following provisions. Annual lease payment in advance at the beginning of each year, 1,000,000 10 years 12 years starting January 1, 2020 Lease term Useful life of machine Implicit interest rate in the lease 12% PV of an ordinary annuity of 1 at 12% for 10 periods PV of an annuity of 1 in advance at 12% for 10 periods PV of 1 at 12% for 10 periods 5.650 6.328 0.322 The entity has an option to purchase the machine on January 1, 2030 by paying P200,000. At the commencement date, it is reasonably certain that the purchase option will be exercised. Required: Prepare journal entries on the books of Petty Company for 2020 and 2021.
On January 1, 2020, Yuri Company leased a machine with Problem 11-6 (IFRS) the following information: 100,000 Annual rental payable at the end of each year 5 years Lease term Implicit rate in the lease Present value of an ordinary annuity of 1 at 6% for 5 periods 6% 4.2124 On January 1, 2022, Yuri Company and the lessor agreed to amend the original terms of the lease by reducing the annuol lease payment by P20,000 and increasing the implicit rate to 8%. The present value of an ordinary annuity of 1 at 8% for 3 periods is 2.5771. Required: 1. Prepare the table of amortization for 2020 and 2021. 2. Prepare journal entries for 2020. 3. Remeasure the lease liability on January 1, 2022. 4. Prepare the table of amortization for 2022, 2023 and 2024. 5. Prepare the journal entries for 2022.
On December 31, 2022, Day Company leased a new machine from Parr with the following pertinent information: Lease term 6 years 500,000 8 years 12% Annual rental payable in beginning of each year Useful life of machine Implicit interest rate in lease Present value of an annuity of 1 in advance for 6 periods at 12% Present value of an ordinary annuity of 1 for 6 periods at 12% 4.60 4.11 The lese is not renewable, and the machine reverts to Parr at the termination of the lease. The cost of the machine on Parr's accounting records is P3,755,000. At the beginning of the lease term, Day should record a lease liability of a. 2,055,000 b. 2,300,000 c. 3,755,000 d. 2,800,000
East Company leased a new machine from North Company on May 1, 2019, under a lease with the following information: Lease term 10 years Annual rental payable at beginning of each lease year $40,000 Useful life of machine 12 years Implicit interest rate 14% Present value factor for an annuity of 1 in advance for 10 periods at 14% 5.95 Present value factor for 1 for 10 periods at 14% 0.27 East has the option to purchase the machine on May 1, 2029, by paying $50,000, which is significantly lower than the expected fair value of the machine on the option exercise date. On May 1, 2019, East should record a right-of-use asset of: a.$238,000 b.$251,500 c.$198,000 d.$224,500
4. Prepare journal entry on January 1, 2027 to record the return of the machinery to the lessor. Assume thefair value of the asset is P300,000
On December 31, 2018, Zonrox Company leased a new machine from Oxide Corporation. The following data relate to the lease transaction at the inception of the lease: 10 years P240,000 12 years Lease term Annual rental payable at the end of each term Estimated life of machine Implicit interest rate Present value of an annuity of P1 for 10 periods at 10% Present value of 1 at 10% for 10 periods 10% 6.145 Unguaranteed residual value Payment to lessor to obtain a long-term lease Annual maintenance cost 0.386 150,000 30,000 35,000 The lease provides for neither a transfer of title to the lessee nor a purchase option. Compute the lease liability on December 31, 2019.
compute the lease liability on December 31, 2019
6. Lessee Company leased a machine on January 1, 2019 with the following pertinent information:Implicit interest rate - 10%Incremental interest rate - 12%Useful life of the machine - 12 yearsLease term - 10 yearsFixed rental payment at the end of each year - 900,000The Lessee Company has the option to purchase the machine upon the lease expiration on January 1, 2029 by paying P400,000. The lessee is reasonably certain to exercise the purchase option at the commencement date of the lease. The estimated residual value of the machine at the end of the 12-year life is P500,000. The carrying value of the right-of-use asset at the end of 2019 is?
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Lease term	6 years
Annual rental payable in beginning of each year	500,000
Useful life of machine	8 years
Implicit interest rate in lease	12%
Present value of an annuity of 1 in advance for 6 periods at 12%	4.60
Present value of an ordinary annuity of 1 for 6 periods at 12%	4.11