Problem 10-8 Dexter Company has maintained a policy of acquiring equipment by leasing. On January 1, 2020, Dexter Company entered into a lease agreement for an equipment. The lease stipulates an annual rental payment of P600,000 to be paid every December 31 starting Decemeber 31, 2020. The lease contains neither a transfer of tittle to the lessee nor a purchase option. The equipment has a residual value of P300,000 at the end of the 5 year lease period but us unguaranteed by the lessee. Th economic life of the equipment is 8 years. The implicit interest rate is 12% after considerimg the unguaranteed residual value. The present value of an ordinary annuity of 1 at 12% for 5 period is 3.60. Required: Prepare journal entries on the books of Dexter Company for 2020. Prepare journal entry on December 31,2024 to record the return of the equipment to the lessor as required by the contract. The fair value of the equipment is P200,000.
Problem 10-8 Dexter Company has maintained a policy of acquiring equipment by leasing. On January 1, 2020, Dexter Company entered into a lease agreement for an equipment. The lease stipulates an annual rental payment of P600,000 to be paid every December 31 starting Decemeber 31, 2020. The lease contains neither a transfer of tittle to the lessee nor a purchase option. The equipment has a residual value of P300,000 at the end of the 5 year lease period but us unguaranteed by the lessee. Th economic life of the equipment is 8 years. The implicit interest rate is 12% after considerimg the unguaranteed residual value. The present value of an ordinary annuity of 1 at 12% for 5 period is 3.60. Required: Prepare journal entries on the books of Dexter Company for 2020. Prepare journal entry on December 31,2024 to record the return of the equipment to the lessor as required by the contract. The fair value of the equipment is P200,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 10-8
Dexter Company has maintained a policy of acquiring equipment by leasing.
On January 1, 2020, Dexter Company entered into a lease agreement for an equipment.
The lease stipulates an annual rental payment of P600,000 to be paid every December 31 starting Decemeber 31, 2020.
The lease contains neither a transfer of tittle to the lessee nor a purchase option.
The equipment has a residual value of P300,000 at the end of the 5 year lease period but us unguaranteed by the lessee. Th economic life of the equipment is 8 years.
The implicit interest rate is 12% after considerimg the unguaranteed residual value.
The present value of an ordinary annuity of 1 at 12% for 5 period is 3.60.
Required:
- Prepare journal entries on the books of Dexter Company for 2020.
- Prepare
journal entry on December 31,2024 to record the return of the equipment to the lessor as required by the contract.
The fair value of the equipment is P200,000.
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