On December 31, 2020, Olivia Inc. leased a machinery from Catriona Company. The cost of the machinery on Catriona’s books is P1,345,815. The terms of the lease contain the following: · Annual payment payable in advance on December 31 each year: 358,500 · Lease term: 4 years · Useful life of machinery: 6 years · Estimated residual value of machinery: 225,000 · Guaranteed residual value upon return: 112,500 INCLUDED in the annual payment is the amount of P28,500 which represents payment of executory costs. First payment is made on commencement date. Implicit interest rate is 7%. On the lessee’s books, how much is the carrying amount of the right of use asset by December 31, 2021? a. 961,387 b. 1,105,708 c. 1,017,637 d. 989,512
On December 31, 2020, Olivia Inc. leased a machinery from Catriona Company. The cost of the machinery on Catriona’s books is P1,345,815. The terms of the lease contain the following: · Annual payment payable in advance on December 31 each year: 358,500 · Lease term: 4 years · Useful life of machinery: 6 years · Estimated residual value of machinery: 225,000 · Guaranteed residual value upon return: 112,500 INCLUDED in the annual payment is the amount of P28,500 which represents payment of executory costs. First payment is made on commencement date. Implicit interest rate is 7%. On the lessee’s books, how much is the carrying amount of the right of use asset by December 31, 2021? a. 961,387 b. 1,105,708 c. 1,017,637 d. 989,512
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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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On December 31, 2020, Olivia Inc. leased a machinery from Catriona Company. The cost of the machinery on Catriona’s books is P1,345,815. The terms of the lease contain the following:
· Annual payment payable in advance on December 31 each year: 358,500
· Lease term: 4 years
· Useful life of machinery: 6 years
· Estimated residual value of machinery: 225,000
· Guaranteed residual value upon return: 112,500
INCLUDED in the annual payment is the amount of P28,500 which represents payment of executory costs. First payment is made on commencement date. Implicit interest rate is 7%. On the lessee’s books, how much is the carrying amount of the right of use asset by December 31, 2021?
· Annual payment payable in advance on December 31 each year: 358,500
· Lease term: 4 years
· Useful life of machinery: 6 years
· Estimated residual value of machinery: 225,000
· Guaranteed residual value upon return: 112,500
INCLUDED in the annual payment is the amount of P28,500 which represents payment of executory costs. First payment is made on commencement date. Implicit interest rate is 7%. On the lessee’s books, how much is the carrying amount of the right of use asset by December 31, 2021?
a. 961,387
b. 1,105,708
c. 1,017,637
d. 989,512
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