On January 1, 20x1, Chirp Co. entered into a 4-year lease agreement with Birds, Inc. for a piece of industrial equipment. Lease payment is P100,000, payable annually starting on January 1, 20x1. Chirp Co. knows that the lessor expects a 10% return on the lease. Chirp Co. has a 12% incremental borrowing rate. The equipment has an estimated useful life of 5 years and a residual value of P25,000. The lease agreement contained a purchase option that is exercisable at the end of the lease term for P50,000. It is reasonably certain that ChirpO Co. will exercise the purchase option. Chirp Co. uses the straight line method of depreciation.
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On January 1, 20x1, Chirp Co. entered into a 4-year lease agreement with Birds, Inc. for a piece of industrial equipment. Lease payment is P100,000, payable annually starting on January 1, 20x1. Chirp Co. knows that the lessor expects a 10% return on the lease. Chirp Co. has a 12% incremental borrowing rate. The equipment has an estimated useful life of 5 years and a residual value of P25,000. The lease agreement contained a purchase option that is exercisable at the end of the lease term for P50,000. It is reasonably certain that ChirpO Co. will exercise the purchase option. Chirp Co. uses the
Requirements:
1. Provide the
2. Prepare Chirp Co.'s Dec. 31, 20x1 partial
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