On January 1, 2016, Dean Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Dean to make annual payments of P100,000 at the end of each year for ten years with title to pass to Dean at the end of this period. The machinery has an estimated useful life of 15 years and no residual value. Dean uses the straight-line method of depreciation for all of its fixed assets. Dean accordingly accounted for this lease transaction as a finance lease. The lease payments were determined to have a present value of P671,008 at an effective interest rate of 8%. With respect to this capitalized lease, Dean should record for 2016
On January 1, 2016, Dean Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Dean to make annual payments of P100,000 at the end of each year for ten years with title to pass to Dean at the end of this period. The machinery has an estimated useful life of 15 years and no residual value. Dean uses the straight-line method of depreciation for all of its fixed assets. Dean accordingly accounted for this lease transaction as a finance lease. The lease payments were determined to have a present value of P671,008 at an effective interest rate of 8%. With respect to this capitalized lease, Dean should record for 2016
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2016, Dean Corporation signed a ten-year noncancelable lease for certain machinery. The terms of the lease called for Dean to make annual payments of P100,000 at the end of each year for ten years with title to pass to Dean at the end of this period. The machinery has an estimated useful life of 15 years and no residual value. Dean uses the straight-line method of
Transcribed Image Text:А.
. lease expense of P100,000.
B. interest expense of P44,734 and depreciation expense of P38,068.
C. interest expense of P53,681 and depreciation expense of P44,734.
D. interest expense of P45,681 and depreciation expense of P67,101
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