FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Jolo Company is in the business of leasing new sophisticated equipment. As lessor, Jolo Company expects a 12% return on the next investment.
All lease are classified as direct financing.
At the end of the lease term, the equipment will revert to Jolo Company.
On January 1, 2020, an equipment is leased to a lessee with the following information.
Cost of equipment to Jolo 5,250,000
Residual value- unguaranteed 600,000
Annual rental payable in advance 900,000
Useful life and lease term 8 years
Implicit interest rate 12%
First lease payment January 1,2020
Required:
- Compute the total financial revenue
- Prepare a table of amortization for the lease receivable and interest income.
- Prepare journal entries for 2020 and 2021.
- Prepare journal entries for 2027
- Prepare
journal entry on January 1, 2028 to record the return of the equipment from the lessee.
The fair value of the equipment on this date is P500,000.
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