On January 1, 20x1, DEMENTED Co. leased office furniture from INSANE, Inc. Payments on the lease will be made as follows: YEAR RENTAL PAYMENT Dec. 31, 20x1 200,000 Dec. 31, 20x2 240,000 Dec. 31, 20x3 260,000 700,000 • As an inducement to enter to the lease, INSANE granted DEMENTED the first six months of the lease rent-free. • Additional rent (contingent rent) of 10% is to be paid for any excess of sales of DEMENTED over P2,000,000. DEMENTED'S sales for 20x1, 20x2, and 20x3 are P1,800,000, P2,000,000, and P3,000,000, respectively. • DEMENTED Co. opts to use the recognition exemption for leases of low value asset. Requirement: Provide all the journal entries in the books of DEMENTED (Lessee).
On January 1, 20x1, DEMENTED Co. leased office furniture from INSANE, Inc. Payments on the lease will be made as follows: YEAR RENTAL PAYMENT Dec. 31, 20x1 200,000 Dec. 31, 20x2 240,000 Dec. 31, 20x3 260,000 700,000 • As an inducement to enter to the lease, INSANE granted DEMENTED the first six months of the lease rent-free. • Additional rent (contingent rent) of 10% is to be paid for any excess of sales of DEMENTED over P2,000,000. DEMENTED'S sales for 20x1, 20x2, and 20x3 are P1,800,000, P2,000,000, and P3,000,000, respectively. • DEMENTED Co. opts to use the recognition exemption for leases of low value asset. Requirement: Provide all the journal entries in the books of DEMENTED (Lessee).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 20x1, DEMENTED Co. leased office furniture from INSANE, Inc. Payments on the lease will be made as follows:
YEAR RENTAL PAYMENT
Dec. 31, 20x1 200,000
Dec. 31, 20x2 240,000
Dec. 31, 20x3 260,000
700,000
• As an inducement to enter to the lease, INSANE granted DEMENTED the first six months of the lease rent-free.
• Additional rent (contingent rent) of 10% is to be paid for any excess of sales of DEMENTED over P2,000,000. DEMENTED'S sales for 20x1, 20x2, and 20x3 are P1,800,000, P2,000,000, and P3,000,000, respectively.
• DEMENTED Co. opts to use the recognition exemption for leases of low value asset.
Requirement: Provide all the journal entries in the books of DEMENTED (Lessee).
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