Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period. Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’. Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system. Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities. Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. To Determine: The pretax amount related to lease reported by Company W in the statement of cash flow for the year ended December 31, 2018.

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XI. Direct Finance Lease – Lessee (PFRS 16)Problem 13. SMC Inc. leased a machine on January 1,2011 to SM Inc. with the following pertinentinformation:Annual rental payable at the beginning of each year P500,000Lease term 5 yearsUseful life of machine 6 yearsFair value of machine on January 1,2011 2,400,000Incremental borrowing rate of lessee 14%Implicit interest rate of lessor known to lessee 12%Bargain purchase option at the end of lease term 100,000Residual value of the machine 200,000Initial direct cost incurred by lessee 300,000Prepaid bonus paid by lessee 400,000Estimated restoration cost in which lessee has contractual obligation 1,000,000Required: Based on your audit, determine the following: ____________1. Initial amount recognized as right of use asset ____________2. Initial amount recognized as leased liability ____________3. Depreciation Expense in 2011 assuming cost model ____________4. Book value of right of use asset on December 31, 2012 ____________5. Current Lease…

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Question

Chapter 21, Problem 21.15E

To determine

Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period.

Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To Determine: The pretax amount related to lease reported by Company W in the statement of cash flow for the year ended December 31, 2018.

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