On January 1, 2021, ABC Company enters into a 4-year lease of a machinery. Annual rental is P200,000 payable at the beginning of each year. ABC does not know the lessor's implicit interest rate. ABC's incremental borrowing rate is 14%. Lessee incurs initial direct costs of P50,000 in negotiating the lease. The underlying asset's remaining useful life is 10 years. Required: 1. Prepare the journal entries for 01/01/2021, 12/31/2021, and 01/01/2022. 2. Compute the carrying amounts of the right of use asset and lease liability on December 31, 2021.
On January 1, 2021, ABC Company enters into a 4-year lease of a machinery. Annual rental is P200,000 payable at the beginning of each year. ABC does not know the lessor's implicit interest rate. ABC's incremental borrowing rate is 14%. Lessee incurs initial direct costs of P50,000 in negotiating the lease. The underlying asset's remaining useful life is 10 years. Required: 1. Prepare the journal entries for 01/01/2021, 12/31/2021, and 01/01/2022. 2. Compute the carrying amounts of the right of use asset and lease liability on December 31, 2021.
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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![On January 1, 2021, ABC Company enters into a 4-year lease of a machinery. Annual rental is P200,000 payable at the beginning of each year. ABC does
not know the lessor's implicit interest rate. ABC's incremental borrowing rate is 14%. Lessee incurs initial direct costs of P50,000 in negotiating the lease.
The underlying asset's remaining useful life is 10 years.
Required:
1. Prepare the journal entries for 01/01/2021, 12/31/2021, and 01/01/2022.
2. Compute the carrying amounts of the right of use asset and lease liability on December 31, 2021.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F20bf6f4d-e21c-46f8-9dde-bcbd004c52c1%2F397b5123-7330-4ac6-ace6-e15ae74f09f7%2Fu1b976q_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On January 1, 2021, ABC Company enters into a 4-year lease of a machinery. Annual rental is P200,000 payable at the beginning of each year. ABC does
not know the lessor's implicit interest rate. ABC's incremental borrowing rate is 14%. Lessee incurs initial direct costs of P50,000 in negotiating the lease.
The underlying asset's remaining useful life is 10 years.
Required:
1. Prepare the journal entries for 01/01/2021, 12/31/2021, and 01/01/2022.
2. Compute the carrying amounts of the right of use asset and lease liability on December 31, 2021.
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