Cost of equipment P1,200,000 Useful life of equipment 5 years Lease term 4 years Annual rent payable at the end of each year Interest rate implicit in the lease r400,000 10% Residual value P80,000

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...
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n January 1, 20x1, POLTROON Co. leased a piece of equipment to COWARD, Inc. Information on
the lease is as follows:
Cost of equipment
P1,200,000
5 years
4 years
Useful life of equipment
Lease term
Annual rent payable at the end of each year
Interest rate implicit in the lease
P400,000
10%
Residual value
P80,000
The equipment will revert back to POLTROON at the end of the lease term. The lease is classified as sales
type lease.
a. How much is the gross investment in the lease on January 1, 20x1 assuming the residual value is
guaranteed?
b. How much are the sales and cost of sales if the residual value is unguaranteed?
Transcribed Image Text:n January 1, 20x1, POLTROON Co. leased a piece of equipment to COWARD, Inc. Information on the lease is as follows: Cost of equipment P1,200,000 5 years 4 years Useful life of equipment Lease term Annual rent payable at the end of each year Interest rate implicit in the lease P400,000 10% Residual value P80,000 The equipment will revert back to POLTROON at the end of the lease term. The lease is classified as sales type lease. a. How much is the gross investment in the lease on January 1, 20x1 assuming the residual value is guaranteed? b. How much are the sales and cost of sales if the residual value is unguaranteed?
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