Assume that DBP Leasing Corp. and Minasugbo Inc. sign a lease contract effective on January 1, 2019 where DBP Leasing leases to Minasugbo a bulldozer. The terms and provisions of the lease contract and other pertinent date are as follows:The term of the lease is five years. The lease agreement is non-cancelable, requiring equal rental payments of P20,711.11 at the beginning of each year (annuity-due basis). The bulldozer has a fair value at the commencement of the lease of P100,000, an estimated economic life of five years, and a guaranteed residual value of P5,000. (Minasugbo expects that it is probable that the expected value of the residual value at the end of the lease will be greater than the guaranteed amount of P5,000.)The lease contains no renewal options. The bulldozer reverts to DBP Leasing at the termination of the lease.Minasugbo’s incremental borrowing rate is 5 percent per year.Minasugbo depreciates its equipment on a straight-line basis.DBP Leasing sets the annual rental rate to earn a rate of return of 4 percent per year; Minasugbo is aware of this rate.Required: Journal Entries for the Lessee for 2019, 2020, and 2024. Show solutions of arrived amounts in good form.

DBP leasing leases to Minasugbo a bulldozer. Therefore, Lessor= DBP leasing Lessee= Minasugbo The…

Answered: Assume that DBP Leasing Corp. and…

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 2E: Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement...

See similar textbooks

Related questions

Concept explainers

Question

Assume that DBP Leasing Corp. and Minasugbo Inc. sign a lease contract effective on January 1, 2019 where DBP Leasing leases to Minasugbo a bulldozer. The terms and provisions of the lease contract and other pertinent date are as follows:

The term of the lease is five years. The lease agreement is non-cancelable, requiring equal rental payments of P20,711.11 at the beginning of each year (annuity-due basis).
The bulldozer has a fair value at the commencement of the lease of P100,000, an estimated economic life of five years, and a guaranteed residual value of P5,000. (Minasugbo expects that it is probable that the expected value of the residual value at the end of the lease will be greater than the guaranteed amount of P5,000.)
The lease contains no renewal options. The bulldozer reverts to DBP Leasing at the termination of the lease.
Minasugbo’s incremental borrowing rate is 5 percent per year.
Minasugbo depreciates its equipment on a straight-line basis.
DBP Leasing sets the annual rental rate to earn a rate of return of 4 percent per year; Minasugbo is aware of this rate.

Required: Journal Entries for the Lessee for 2019, 2020, and 2024. Show solutions of arrived amounts in good form.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.