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.
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.
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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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.
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