On January 1, 2019, Kimchi jjigae Inc. leased a machine by signing a four-year lease contract. Annual payments of P1,000,000 are payable at the beginning of each year starting January 1, 2019. Kimchi jjigae is given the bargain option to buy the machine for P250,000 at December 31, 2022. The asset’s useful life is five years, at the end of which the asset’s scrap value is expected to be P400,000. Kimchi jjigae uses straight-line method to depreciate this asset. The lessor’s implicit rate is 10%, which is known to Kimchi jjigae. At what amount should the right-of-use asset be recorded on January 1, 2019? (use four decimal places for PV factor)

On January 1, 2019, Kimchi jjigae Inc. leased a machine by signing a four-year lease contract. Annual payments of P1,000,000 are payable at the beginning of each year starting January 1, 2019. Kimchi jjigae is given the bargain option to buy the machine for P250,000 at December 31, 2022. The asset’s useful life is five years, at the end of which the asset’s scrap value is expected to be P400,000. Kimchi jjigae uses straight-line method to depreciate this asset. The lessor’s implicit rate is 10%, which is known to Kimchi jjigae. At what amount should the right-of-use asset be recorded on January 1, 2019? (use four decimal places for PV factor)

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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