Maya Company leased equipment from Waya Company on July 1, 2020 for an eight -year period expiring June 30, 2028. Equal payment under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2020. The rate of interest contemplated by Maya and Waya is 10%. The cash selling price of the equipment is P3,520,000 and the carrying amount is P2,800,000. The lease is appropriately recorded as a sales type lease. What amount of profit on the sale should be recorded for year ended December 31, 2020?

Maya Company leased equipment from Waya Company on July 1, 2020 for an eight -year period expiring June 30, 2028. Equal payment under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2020. The rate of interest contemplated by Maya and Waya is 10%. The cash selling price of the equipment is P3,520,000 and the carrying amount is P2,800,000. The lease is appropriately recorded as a sales type lease. What amount of profit on the sale should be recorded for year ended December 31, 2020?

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 August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring payments of 10,000 at the beginning of each year. The machine cost 40,000 and has a useful life of 8 years with no residual value. Kerns implicit interest rate is 10%, and present value factors are as follows: Present value for an annuity due of 1 at 10% for 6 periods4.791 Present value for an annuity due of 1 at 10% for 8 periods5.868 Kern appropriately recorded the lease as a sales-type lease. At the inception of the lease, the Lease Receivable account balance should be: a. 60,000 b. 58,680 c. 48,000 d. 47,910
Kizaru Company leased equipment to Fujitora Company on January 1, 2020 for an eight-year period expiring January 1, 2028. Equal payments under the lease are P 600,000 and are due on January 1 of each year. The first payment was made on January 1, 2020. The rate of interest contemplated is 10%. The cash selling price of the equipment is P 3,520,000, and the cost of the equipment is P 2,800,000. Kizaru Company paid initial direct costs of P 50,000 in negotiating and arranging the lease. The lease is appropriately recorded as a sales type lease. Required: Prepare journal entries on the books of Kizaru Company for 2020 and 2021.
On July 1, 2020, Yum Company leased equipment to Burger Company for an 8-year period. Equal payments under the lease are P600,000 and are due on July 1 each year. The first payment was made on July 1, 2020. The interest rate contemplated by Yum and Burger is 10%. The cash selling price of the equipment is P3,520,000 and the cost of the equipment on Yum Company's accounting records is P2,800,000. The lease is appropriately recorded as a sales-type lease. 1. What amount of profit on sale should be recognized for the year ended December 31, 2020? 2. Using Yum Company's data, what amount of interest revenue should be recorded for the year ended December 31, 2020?
ABC Company leased equipment to XYZ Company on July 1, 2020, for a ten-year period expiring June 30, 2030. Equal annual payments under the lease are P80,000 and are due on July 1 of each year. The first payment was made on July 1, 2020. The rate of interest implicit in the lease is 9%. The cash selling price of the equipment is P560,000 and the cost of the equipment on ABC's accounting records was P496,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by ABC, what is the amount of profit on the sale and the interest revenue that ABC would record for the year ended December 31, 2020? A. P64,000 and P50,400 B. P64,000 and P43,200 C. P64,000 and P21,600 D. P0 and P0
ABC Company leased equipment to XYZ Company on July 1, 2020, for a ten-year period expiring June 30, 2030. Equal annual payments under the lease are P80,000 and are due on July 1 of each year. The first payment was made on July 1, 2020. The rate of interest implicit in the lease is 9%. The cash selling price of the equipment is P560,000 and the cost of the equipment on ABC's accounting records was P496,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by ABC, what is the amount of profit on the sale and the interest revenue that ABC would record for the year ended December 31, 2020? *
On January 1, 2021, Worcester Construction leased International Harvester equipment from Newton LeaseCorp. Newton LeaseCorp purchased the equipment from Wellesley Harvester at a cost of $958,158. Worcester's borrowing rate for similar transactions is 10%.The lease agreement specified four annual payments of $200,000 beginning January 1, 2021, the beginning of the lease, and on each December 31 thereafter through 2023. The useful life of the equipment is estimated to be six years. The present value of those four payments at a discount rate of 10% is $697,370.On January 1, 2023 (after two years and three payments), Worcester and Newton agreed to extend the lease term by two years. The market rate of interest at that time was 9%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the appropriate entries for Worcester Construction on January 1, 2023, to adjust its lease liability for the lease…
Michelle Company leased equipment to May Corporation on July 1, 2012 for an eight-year period expiring June 30, 2020. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2012. The cash selling price of the equipment is P3,520,000 which reflects its present value, and the cost of the equipment on Michelle's accounting records is P2,800,000. The lease is appropriately recorded as a dealer's lease. What is the amount of the resulting gross profit from this sale at the inception of the lease? a. P45,000 b. P90,000 c. P720,000 d. P1,280,000 Use the same information given above, What other revenue should Michelle report in her income statement for year ended December 31, 2012? a. P292,000 b. P146,000 c. P176,000 d. P352,000 e. P0
Zinc Co. leased equipment from Helium Company on July 1, 2018 for an 8-year period expiring June 30, 2026. Equal payments under the lease areP600,000 and are due on July 1 of each year. The first payment was madeon July 1, 2018. The rate of interest contemplated by Zinc and Helium is10%. The cash selling price of the equipment is P3,520,000 and the cost ofthe equipment on Helium's accounting records is P2,800,000. The lease isappropriately recorded as sales-type lease. What is the amount of interestrevenue that Helium should record for the year ended December 31, 2018?
Michael Company leased equipment to Hay Corporation on July 1, 2012 for an eight-year period expiring June 30, 2020. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2012. The cash selling price of the equipment is P3,520,000 which reflects its present value, and the cost of the equipment on Michael's accounting records is P2,800,000. The lease is appropriately recorded as a dealer's lease. What other revenue should Michael report in his income statement for year ended December 31, 2012? a. P292,000 b. P146,000 c. P176,000 d. P352,000 e. P0
Michael Company leased equipment to Hay Corporation on July 1, 2012 for an eight-year period expiring June 30, 2020. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2012. The cash selling price of the equipment is P3,520,000 which reflects its present value, and the cost of the equipment on Michael's accounting records is P2,800,000. The lease is appropriately recorded as a dealer's lease. What is the amount of the resulting gross profit from this sale at the inception of the lease? a. P45,000 b. P90,000 c. P720,000 d. P1,280,000
Pye Company leased equipment to the Polan Company on July 1,2025 , for a ten-year period expiring June 30,2036 . Equal annual payments under the lease are$240,000and are due on July 1 of each year. The first payment was made on July 1, 2025. The rate of interest contemplated by Pye and Polan is9%. The lease receivable before the first payment is$1,680,000and the cost of the equipment on Pye's accounting records was$1,488,000. Assuming that the lease is appropriately recorded as a sale for accounting purposes by Pye, what is the amount of profit on the sale and the interest revenue that Pye would record for the year ended December31,2025?
On April 1, 2021, Xai Company acquired a machine by signing a four-year lease. Annual rentals of P1,742,174 are payable at the beginning of each lease year starting April 1, 2021. Xai is given the option to buy the machine for P250,000 on April 1, 2025, when the asset's market price is expected to be P1,250,000. The asset's useful life is 6 years, at the end of which the asset's scrap value is expected to be P600,000. Xai uses the straight-line method to depreciate this asset. With an implicit interest rate of 10%, Xai appropriately recorded the machine and the related liability on April 1, 2021 at P6,245,450. Xai Company follows the calendar year as its accounting period. 1. How much is the depreciation expense recognized by Xai for the years ended December 31, 2022 and December 31, 2021? A. P940,908 and P705,681 B. P1.411,363 and P1,058,522 C. P1,040,833 and P780,625 D. P1.561,363 and P1,171,022