On December 31, 2021, Tracy Co. signed a 4-year, noncancelable lease for a right of use of machine requiring P150,000 annual payments beginning December 31, 2021. The annual payments include payment for insurance and property taxes amounting to P20,000. On the same data, Tracy Co. paid P40,000 incremental costs that are directly attributable to negotiating and arranging a lease. The machine has a useful life of 8 years, with no salvage value. The rate implicit on the lease is 10%. Tracy Co. Guarantee a residual value of P50,000 at the end of the lease term. The fair value of the machine at the incpetion of the lease amounted to P518,561. 5. How much is the initial cost of the right of use asset on December 31, 2021? a. P487,447 b. P495,975 6. How much is the interest expense in 2022? a. Nil C. P527,447 d. P577,447 C. P52,745 d. P57,745 b. P35,745 7. How much is the lease-related liability to be shown as current in the statement of financial position on December 31, 2021? a. P357,447 b. P263,192 a. P357,447 b. P263,192 C. P94,255 d. P35,745 8. How much is the lease-related liability to be shown as non-current in the statement of financial position on December 31, 2021? C. d. P94,255 P35,745

On December 31, 2021, Tracy Co. signed a 4-year, noncancelable lease for a right of use of machine requiring P150,000 annual payments beginning December 31, 2021. The annual payments include payment for insurance and property taxes amounting to P20,000. On the same data, Tracy Co. paid P40,000 incremental costs that are directly attributable to negotiating and arranging a lease. The machine has a useful life of 8 years, with no salvage value. The rate implicit on the lease is 10%. Tracy Co. Guarantee a residual value of P50,000 at the end of the lease term. The fair value of the machine at the incpetion of the lease amounted to P518,561. 5. How much is the initial cost of the right of use asset on December 31, 2021? a. P487,447 b. P495,975 6. How much is the interest expense in 2022? a. Nil C. P527,447 d. P577,447 C. P52,745 d. P57,745 b. P35,745 7. How much is the lease-related liability to be shown as current in the statement of financial position on December 31, 2021? a. P357,447 b. P263,192 a. P357,447 b. P263,192 C. P94,255 d. P35,745 8. How much is the lease-related liability to be shown as non-current in the statement of financial position on December 31, 2021? C. d. P94,255 P35,745

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Neal Company entered into a nine-year capital lease on a warehouse on December 31, 2021. Lease payments of P520,000, which includes executory cost of P20,000 is due annually, beginning on December 31, 2022, and every December 31 thereafter. The cost of restoring the underlying asset to its original condition as required by the contract was estimated at the present value of P200,000. The interest rate implicit in the lease if 9%. The present value of an ordinary annuity of 1 for nine years at 9% is 5.6. Question: - What amount should be reported as lease liability on December 31, 2021? A. 2,800,000B. 2,912,000C. 4,500,000D. 4,680,000 - What amount should be recognized initially as cost of the right of use asset? A. 2,800,000B. 3,000,000C. 3,112,000D. 4,700,000
On January 1, 2020, Bacarra Company leased an asset for a term of six years. Annual rentals of P500,000 is payable every yearend. The cost of the leased asset is P2,100,000. Initial direct costs paid by Bacarra totaled P6,360. The asset will revert to Bacarra at the end of the lease term, when its residual value would amount to P100,000. Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, how much is cost of sales resulting from the lease?
edom Company, the lessor, enters into a lease with Davis Company to lease equipment to Davis beginning January 1, 2013. The lease terms, provisions, and related events are as follows: 11 1. The lease term is 5 years. The lease is noncancelable and requires annual rental receipts of $100,00 to be made in advance at the beginning of eacy year. 2. The equipment costs $313,000. the equipment has an estimatd life of 6 years and, at the end of the lease term, has an unguaranteed residual value of $20,000 accruing to the benefit of Edom. 3. Davis agrees to pay all executory costs. 4. The interest rate implicit in the leae is 14%. 5. The intial direct costs are insignificant and assumed to be zero. 6. The collectibility of the rentals is reasonably assured, and there are no important uncertainties surrounding the amount of unreimbursable costs yet to be incurred by the lessor. Prepare journal entries for Edom for the years 2013 and 2014.
Sandiago Co leased the equipment to Dedi Inc, on April 1, 2016. The lease, properly accounted for as a sale by Sandiago, has a period of 8 years ending March 31, 2024. The first of 8 equal annual payments is Rp 17,500,000 per year (excluding implementation costs) was carried out on April 1, 2016. The cost of equipment for Sandiago was Rp. 94,000,000. The equipment has an estimated useful life of 8 years with no salvage value, Sandiago uses straight-line depreciation and depreciates a full year in the year of purchase. The cash selling price of this equipment is IDR 102,690,000. Required: (1) Prepare the journal entries needed to record the lease on Sandiago's books (2) How much interest income will Sandiago recognize in 20167
Cullumber Corporation, which uses ASPE, enters into a 6-year lease of equipment on September 1, 2023, that requires 6 annual payments of $38,000 each, beginning September 1, 2023. In addition, Cullumber guarantees the lessor a residual value of $27,000 at lease end. The equipment has a useful life of seven years. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE OF 1. (a) Using (1) tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the capital lease and prepare Cullumber's September 1, 2023 journal entry assuming an interest rate of 12%. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.)…
American Food Services, Inc. leased a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2021. The lease agreement for the $4.1 million (fair value and present value of the lease payments) machine specified four equal payments at the end of each year. The useful life of the machine was expected to be five years with no residual value. Barton and Barton's implicit interest rate was 10%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entry for American Food Services at the beginning of the lease on January 1, 2021. 2. Prepare an amortization schedule for the four-year term of the lease. 3. & 4. Prepare the appropriate entries related to the lease on December 31, 2021 and 2023. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Prepare the appropriate entries related to the lease…
Charlotte Corp., a machinery dealer, leased a machine to Eleanor Corp. on January 1, 2022. The lease is for an 8-year period, is noncancelable and requires equal annual payments of $35,013 at the beginning of each year. The first payment is received on January 1, 2022. Charlotte had purchased the machine during 2021 for $160,000. The FMV of the machine is 200,000. The present value of the minimum lease payments is also $200,000. Collectibility of lease payments is reasonably predictable, and no important uncertainties surround the amount of costs yet to be incurred by Charlotte. Charlotte set the annual rental to ensure an 11% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Charlotte at the termination of the lease. Required: What type of lease is this for Charlotte (lessor) and why Prepare all of Charlotte’s journal entries for 2022.
On January 1, 2012, Thelma Industries leased equipment to Tricia Company for a four-year period ending December 31, 2015. The equipment cost Thelma P300,000 and has an expected useful life of five years. Annual payments are P118,951, including P10,000 executory costs. The equipment's fair value is P400,000. The lessee guarantees the residual value of P80,000. Lease payment is due every December 31 and Tricia made the first payment on December 31, 2012. Thelma incurred P15,000 costs contract. The rate implicit in the lease after adjustments for the costs incurred by Thelma is 10%. Present value of 1 discounted at 10% for 4 periods is 0.68301. Present value of annuity due of 1 for 4 periods discounted at 10% is 3.48685. Present value of ordinary annuity of 1 at 10% for 4 periods is 3.16987. How much profit, inclusive of interest revenue, should Thelma report from this lease for the year ended December 31, 2012? a. P100,000 b. P125,000 c. P140,000 d. P162,991
On January 1, 2019, Zendaya Corp. signed a five-year non-cancelable lease for machine with Cassie Company. The terms of the lease called for Zendaya to make annual payments of P86,680 at the beginning of each year starting January 1, 2019. The machine has an estimated useful life of 6 years and a P50,000 unguaranteed residual value at the end of the five year lease term. The machine reverts to the lessor at the end of five-year lease term. Zendaya uses straight-line method of depreciation for all of its fixed assets. The implicit rate of the contract which is known by Zendaya is 10%. The fair value of the machine on January 1, 2019 is P392,490. Zendaya incurred P10,000 to install the machine. Zendaya has an obligation to restore the machine to a condition suitable for use at the end of the lease term. Estimated cost of restoration is P20,000. (Use four decimal places for the PV factor) Applying IFRS 16, how much is the current and the non-current portion of the liability to be…
On January 1, 2024, Gravel Incorporated leased construction equipment from Rocky Mountain Leasing. Rocky Mountain Leasing purchased the equipment from Bishop Incorporated at a cost of $2,069,621. Gravel's borrowing rate for similar transactions is 10%. The lease agreement specified four annual payments of $432,000 beginning January 1, 2024, the beginning of the lease, and at each December 31 thereafter through 2026. The useful life of the equipment is estimated to be six years. The present value of those four payments at a discount rate of 10% is $1,506,319. On January 1, 2026 (after two years and three payments), Gravel and Rocky Mountain agreed to extend the lease term by two years. The market rate of interest at that time was 9%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare the appropriate journal entries for Gravel Incorporated on January 1, 2026, to adjust its lease liability for the…
STILL NEED ASAP
Magnitude Ltd acquired an item of plant under a three-year lease on January 1, 2019. The remaining useful life of the plant is seven years and there are no transfer of the asset and no purchase option at the end of the lease. The rental payments are $10,000,000 per annum payable in arrears for the three years on December 31 each year and the company incurs initial direct costs of $20,000 and receives lease incentives of $16,000. The interest rate implicit in the lease is 8% per annum. Required: a. Prepare the relevant journal entries in the first year of the lease. b. Prepare the relevant financial statement extracts in the first year of the lease