Welington Company submits quarterly and yearly accounting reports for consolidation to its parent company in the US. Based on a review of the company’s production department, Welington needs another packing machine to be able to hasten delivery of orders by customers. On December 31, 2017, Welington agreed to lease a packing equipment for its entire 9-year useful life from Daniel Company. The lease contract provides for lease payments of P1,400,000 from the start of the lease term, and annually thereafter every December 31 for the next 8 years. The 9 lease payments over the lease term have a present value on December 31, 2007, at a rate implicit in the lease known by Welington as 10%, of P8,862,000. The December 31, 2017 present value of the lease payments at Welington Company’s incremental borrowing rate of 12% was P8,358,000. A timely second lease payment was made by Welington Company. The lease liability that Welington Company should report as non-current to its parent company in its December 31, 2018 financial statements shall be:
Welington Company submits quarterly and yearly accounting reports for consolidation to its parent company in the US. Based on a review of the company’s production department, Welington needs another packing machine to be able to hasten delivery of orders by customers. On December 31, 2017, Welington agreed to lease a packing equipment for its entire 9-year useful life from Daniel Company. The lease contract provides for lease payments of P1,400,000 from the start of the lease term, and annually thereafter every December 31 for the next 8 years. The 9 lease payments over the lease term have a present value on December 31, 2007, at a rate implicit in the lease known by Welington as 10%, of P8,862,000. The December 31, 2017 present value of the lease payments at Welington Company’s incremental borrowing rate of 12% was P8,358,000. A timely second lease payment was made by Welington Company. The lease liability that Welington Company should report as non-current to its parent company in its December 31, 2018 financial statements shall be:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Welington Company submits quarterly and yearly accounting reports for consolidation to its parent company in the US. Based on a review of the company’s production department, Welington needs another packing machine to be able to hasten delivery of orders by customers. On December 31, 2017, Welington agreed to lease a packing equipment for its entire 9-year useful life from Daniel Company. The lease contract provides for lease payments of P1,400,000 from the start of the lease term, and annually thereafter every December 31 for the next 8 years. The 9 lease payments over the lease term have a present value on December 31, 2007, at a rate implicit in the lease known by Welington as 10%, of P8,862,000. The December 31, 2017 present value of the lease payments at Welington Company’s incremental borrowing rate of 12% was P8,358,000. A timely second lease payment was made by Welington Company. The lease liability that Welington Company should report as non-current to its parent company in its December 31, 2018 financial statements shall be:
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