3. On January 1, 2020, Metro Industrial Company leased equipment to Western Company for a four-year period ending December 31, 2023. The equipment cost Metro Industries P300,000 and has an expected useful life of five years. Annual payments are P109,046 (including P10,000 executory costs). The equipment's fair value is P368,606. The lessee guarantees the residual value of P80,000. Lease payment is due every December 31 and Western made the first payment on December 31, 2020. Metro Industrial Company's implicit interest rate, which is known to Western Company, is 10%, Metro incurred and paid P15,000 in consummating the lease contract on January 1, 2020. REQUIRED: (a) (b) How much sales should Metro Industries record from this transaction during 2020? How much is the total profit reported in Metro Industrial Company's statement of comprehensive income for the year ended December 31, 2020? How much depreciation expense should Western Company record on this equipment for the year 2020?

3. On January 1, 2020, Metro Industrial Company leased equipment to Western Company for a four-year period ending December 31, 2023. The equipment cost Metro Industries P300,000 and has an expected useful life of five years. Annual payments are P109,046 (including P10,000 executory costs). The equipment's fair value is P368,606. The lessee guarantees the residual value of P80,000. Lease payment is due every December 31 and Western made the first payment on December 31, 2020. Metro Industrial Company's implicit interest rate, which is known to Western Company, is 10%, Metro incurred and paid P15,000 in consummating the lease contract on January 1, 2020. REQUIRED: (a) (b) How much sales should Metro Industries record from this transaction during 2020? How much is the total profit reported in Metro Industrial Company's statement of comprehensive income for the year ended December 31, 2020? How much depreciation expense should Western Company record on this equipment for the year 2020?

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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