Wiwil Co. from Malaybalay City leased an equipment of January 3, 2017 from the lessor Gui-yang Corp. The lease contract provides the following: Annual fixed payments in advanced at January 3 of each lease year 2,000,000 Initial direct cost paid on January 3, 2017 500,000 Lease incentive received 300,000 Residual value guaranteed 600,000 Executory cost 50,000 Contractual lease term 5 years Useful life of equipment 6 years The implicit rate of the lease was at 8% (Please only answer the highlighted question) a. Compute for the cost of the right of use asset recognized by Wiwil at the start of the lease. b. What is the interest expense for 2017? c. What is the depreciation expense for 2017?
Wiwil Co. from Malaybalay City leased an equipment of January 3, 2017 from the lessor Gui-yang Corp. The lease contract provides the following: Annual fixed payments in advanced at January 3 of each lease year 2,000,000 Initial direct cost paid on January 3, 2017 500,000 Lease incentive received 300,000 Residual value guaranteed 600,000 Executory cost 50,000 Contractual lease term 5 years Useful life of equipment 6 years The implicit rate of the lease was at 8% (Please only answer the highlighted question) a. Compute for the cost of the right of use asset recognized by Wiwil at the start of the lease. b. What is the interest expense for 2017? c. What is the depreciation expense for 2017?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Wiwil Co. from Malaybalay City leased an equipment of January 3,
2017 from the lessor Gui-yang Corp. The lease contract provides
the following:
Annual fixed payments in advanced at
January 3 of each lease year 2,000,000
Initial direct cost paid on January 3, 2017 500,000
Lease incentive received 300,000
Residual value guaranteed 600,000
Executory cost 50,000
Contractual lease term 5 years
Useful life of equipment 6 years
The implicit rate of the lease was at 8%
(Please only answer the highlighted question)
a. Compute for the cost of the right of use asset recognized by
Wiwil at the start of the lease.
b. What is the interest expense for 2017?
c. What is the depreciation expense for 2017?
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