PROBLEMS Problem 10-1 (AICPA Adapted) On January 1, 2020, Mixx Company entered into a lease for a new warehouse. Lease payments are P800,000 a year for 5 years, payable in advance starting January 1, 2020. The warehouse has an estimated life of 10 years. The entity paid initial direct cost of P100,000 on January 1, 2020. The realty taxes of P40,000 a year are to be paid by the entity The lease provides for neither transfer of title to the lesses upon expiration of the lease term nor a purchase option. The underlying asset is reverted to the lessor at the expiration of the lease term. The interest rate implicit in the lease is 10%. The relevant present value factors are: PV of an ordinary annuity of 1 at 10% for 5 periods PV of an annuity of 1 in advance at 10 % for 5 periods 3.79 4.17 Required: 1. Prepare journal entries on the books of Mixx 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 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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Lease payments are P800,000 a year for 5 years, payable in
The warehouse has an estimated life of 10 years. The entity
On January 1, 2020, Mixx Company entered into a lease for
PROBLEMS
Problem 10-1 (AICPA Adapted)
a new warehouse.
advance starting January 1, 2020.
paid initial direct cost of P100,000 on January 1, 2020.
The realty taxes of P40,000 a year are to be paid by the entity
The lease provides for neither transfer of title to the lesses
upon expiration of the lease term nor a purchase option.
The underlying asset is reverted to the lessor at the
expiration of the lease term.
The interest rate implicit in the lease is 10%. The relevant
present value factors are:
PV of an ordinary annuity of 1 at 10% for 5 periods
PV of an annuity of 1l in advance at 10% for 5 periods
3.79
4.17
Required:
1. Prepare journal entries on the books of Mixx Company
for 2020 and 2021.
2. Prepare journal entry upon expiration of the lease on
January 1, 2025.
356
Transcribed Image Text:Lease payments are P800,000 a year for 5 years, payable in The warehouse has an estimated life of 10 years. The entity On January 1, 2020, Mixx Company entered into a lease for PROBLEMS Problem 10-1 (AICPA Adapted) a new warehouse. advance starting January 1, 2020. paid initial direct cost of P100,000 on January 1, 2020. The realty taxes of P40,000 a year are to be paid by the entity The lease provides for neither transfer of title to the lesses upon expiration of the lease term nor a purchase option. The underlying asset is reverted to the lessor at the expiration of the lease term. The interest rate implicit in the lease is 10%. The relevant present value factors are: PV of an ordinary annuity of 1 at 10% for 5 periods PV of an annuity of 1l in advance at 10% for 5 periods 3.79 4.17 Required: 1. Prepare journal entries on the books of Mixx Company for 2020 and 2021. 2. Prepare journal entry upon expiration of the lease on January 1, 2025. 356
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