On January 1, 2020, Petty Company leased a machine with the following provisions. Annual lease payment in advance at the beginning of each year, 1,000,000 10 years 12 years starting January 1, 2020 Lease term Useful life of machine Implicit interest rate in the lease 12% PV of an ordinary annuity of 1 at 12% for 10 periods PV of an annuity of 1 in advance at 12% for 10 periods PV of 1 at 12% for 10 periods 5.650 6.328 0.322 The entity has an option to purchase the machine on January 1, 2030 by paying P200,000. At the commencement date, it is reasonably certain that the purchase option will be exercised. Required: Prepare journal entries on the books of Petty Company for 2020 and 2021.
On January 1, 2020, Petty Company leased a machine with the following provisions. Annual lease payment in advance at the beginning of each year, 1,000,000 10 years 12 years starting January 1, 2020 Lease term Useful life of machine Implicit interest rate in the lease 12% PV of an ordinary annuity of 1 at 12% for 10 periods PV of an annuity of 1 in advance at 12% for 10 periods PV of 1 at 12% for 10 periods 5.650 6.328 0.322 The entity has an option to purchase the machine on January 1, 2030 by paying P200,000. At the commencement date, it is reasonably certain that the purchase option will be exercised. Required: Prepare journal entries on the books of Petty 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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On January 1, 2020, Petty Company leased a machine with the following provisions. Annual lease payment in advance at the beginning of each year, 1,000,000 10 years 12 years starting January 1, 2020 Lease term Useful life of machine Implicit interest rate in the lease 12% PV of an ordinary annuity of 1 at 12% for 10 periods PV of an annuity of 1 in advance at 12% for 10 periods PV of 1 at 12% for 10 periods 5.650 6.328 0.322 The entity has an option to purchase the machine on January 1, 2030 by paying P200,000. At the commencement date, it is reasonably certain that the purchase option will be exercised. Required: Prepare
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