On December 31, 2020, Naruto Company leased a new machine from Sasuke with the following pertinent information: Lease term 6 years Annual rental payable in beginning of each year 500,000 Useful life of machine 8 years Implicit interest rate in lease 12% Present value of an annuity of 1 in advance for 6 periods at 12% 4.60 Present value of an ordinary annuity of 1 for 6 periods at 12% 4.11 The lease is not renewable, and the machine reverts to Sasuke at the termination of the lease. The cost of the machine on Sasuke’s accounting records is P3,755,000. At the beginning of the lease term, Naruto should record a lease liability of
On December 31, 2020, Naruto Company leased a new machine from Sasuke with the following pertinent information: Lease term 6 years Annual rental payable in beginning of each year 500,000 Useful life of machine 8 years Implicit interest rate in lease 12% Present value of an annuity of 1 in advance for 6 periods at 12% 4.60 Present value of an ordinary annuity of 1 for 6 periods at 12% 4.11 The lease is not renewable, and the machine reverts to Sasuke at the termination of the lease. The cost of the machine on Sasuke’s accounting records is P3,755,000. At the beginning of the lease term, Naruto should record a lease liability of
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
Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments
Section: Chapter Questions
Problem 3MC: Electro Corporation bought a new machine and agreed to pay for it in equal annual installments of...
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Question
On December 31, 2020, Naruto Company leased a new machine from Sasuke with the following pertinent information:
|
Lease term |
6 years |
|
Annual rental payable in beginning of each year |
500,000 |
|
Useful life of machine |
8 years |
|
Implicit interest rate in lease |
12% |
|
Present value of an annuity of 1 in advance for 6 periods at 12% |
4.60 |
|
Present value of an ordinary annuity of 1 for 6 periods at 12% |
4.11 |
The lease is not renewable, and the machine reverts to Sasuke at the termination of the lease. The cost of the machine on Sasuke’s accounting records is P3,755,000.
At the beginning of the lease term, Naruto should record a lease liability of
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