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?
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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TOPIC: LEASES
a. How much sales should Metro Industries record from this transaction during 2020?
b. How much is the total profit reported in Metro Industrial Company's statement of comprehensive income for the year ended December 31, 2020?
c. How much
Transcribed Image Text:3-13. 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?
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