On Jan. 1, 2021, Sleepy Company entered into a direct financing lease. A third party guaranteed the residual value of the asset under the lease estimated to be Php1,200,000 on Jan. 1, 2025, the end of the lease term. Annual lease payments are Php1,000,000 due each Dec. 31, beginning Dec. 31, 2021. The last payment is due on Dec. 31, 2024. The remaining useful life of the asset was six years at the commencement of the lease. The lessor used 10% as the implicit interest rate. The PV of 1 at 10% for 5 periods is.62 and the PV of an ordinary annuity of P1 at 10% for 5 periods is 3.79.
On Jan. 1, 2021, Sleepy Company entered into a direct financing lease. A third party guaranteed the residual value of the asset under the lease estimated to be Php1,200,000 on Jan. 1, 2025, the end of the lease term. Annual lease payments are Php1,000,000 due each Dec. 31, beginning Dec. 31, 2021. The last payment is due on Dec. 31, 2024. The remaining useful life of the asset was six years at the commencement of the lease. The lessor used 10% as the implicit interest rate. The PV of 1 at 10% for 5 periods is.62 and the PV of an ordinary annuity of P1 at 10% for 5 periods is 3.79.
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 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...
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Question
What is the gross investment in the lease? *
a. 5,000,000
b. 6,200,000
c. 3,800,000
d. 5,744,000
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