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pha Company leased an eq

pha Company leased an eq

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Alpha Company buys equipment for leasing to various manufacturing entities. On January 1, 2020, Alpha Company leased an equipment to another entity, The cost of the equipment to Alpha Company was P1,377,480 which approximates the fair value on the lease date. The expected economic life of the equipment is also 4 years. The lease payments stipulated in the lease are P440,000 per year in advance for a 4-year period of the lease. The payments include P40,000 executory costs per year. The title to the equipment remains in the hands of Alpha Company at the end of the lease term, although only nominal residual value is expected at that time. The implicit interest rate in the lease is 11%. The fiscal year of Alpha Company ends December 31. Required: 1. Compute the total financial revenue. 2. Prepare an amortization schedule for the lease receivable and interest income. 3. Prepare journal entries for 2020, 2021, 2022 and 2023.
Transcribed Image Text:Alpha Company buys equipment for leasing to various manufacturing entities. On January 1, 2020, Alpha Company leased an equipment to another entity, The cost of the equipment to Alpha Company was P1,377,480 which approximates the fair value on the lease date. The expected economic life of the equipment is also 4 years. The lease payments stipulated in the lease are P440,000 per year in advance for a 4-year period of the lease. The payments include P40,000 executory costs per year. The title to the equipment remains in the hands of Alpha Company at the end of the lease term, although only nominal residual value is expected at that time. The implicit interest rate in the lease is 11%. The fiscal year of Alpha Company ends December 31. Required: 1. Compute the total financial revenue. 2. Prepare an amortization schedule for the lease receivable and interest income. 3. Prepare journal entries for 2020, 2021, 2022 and 2023.
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