On January 1, 2020, Baal Co. (lessee) entered into a contract of lease with Raiden Shogun Co. (lessor) that allows Baal to use specialized equipment for 4 years. The equipment had a useful life of 5 years. The following terms were agreed on January 1, 2020: • P250,000 annual rental, the first payment will be on on December 31, 2020 followed by subsequent payments every December 31 hereafter, for a total of 4 payments. • Implicit rate of the lease was 8%, while the incremental borrowing rate of Baal was 10%. • The lease agreement provides for a purchase option of P100,000, at the end of the lease term. Baal will exercise the option with reasonable certainty. The option was exercised by Baal Co. at the end of the lease term. (round off PV factors to 4 decimal places) Prepare an amortization table for the lease liability.

On January 1, 2020, Baal Co. (lessee) entered into a contract of lease with Raiden Shogun Co. (lessor) that allows Baal to use specialized equipment for 4 years. The equipment had a useful life of 5 years. The following terms were agreed on January 1, 2020: • P250,000 annual rental, the first payment will be on on December 31, 2020 followed by subsequent payments every December 31 hereafter, for a total of 4 payments. • Implicit rate of the lease was 8%, while the incremental borrowing rate of Baal was 10%. • The lease agreement provides for a purchase option of P100,000, at the end of the lease term. Baal will exercise the option with reasonable certainty. The option was exercised by Baal Co. at the end of the lease term. (round off PV factors to 4 decimal places) Prepare an amortization table for the lease liability.

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 4P: Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides...

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