On January 1, 2012, Manila Company purchased a machine under the following terms: a. 100,000 downpayment b. four annual payments of P200, 000, the first installment to be paid on December 31, 2012 The fair value of the machine is not clearly determinable on the date of acquisition. The prevailing rate of interest for this type of obligation is 10%. The present value factors at 10% for four periods are: Present value of 1 .683 Present value of ordinary annuity of 1 3.170 Required: How much is the cost of the machine

On January 1, 2012, Manila Company purchased a machine under the following terms: a. 100,000 downpayment b. four annual payments of P200, 000, the first installment to be paid on December 31, 2012 The fair value of the machine is not clearly determinable on the date of acquisition. The prevailing rate of interest for this type of obligation is 10%. The present value factors at 10% for four periods are: Present value of 1 .683 Present value of ordinary annuity of 1 3.170 Required: How much is the cost of the machine

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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At the beginning of 2018, VHF Industries acquired a machine with a fair value of $6,074,700 by issuing a fouryear, noninterest-bearing note in the face amount of $8 million. The note is payable in four annual installmentsof $2 million at the end of each year.Required:1. What is the effective rate of interest implicit in the agreement?2. Prepare the journal entry to record the purchase of the machine.3. Prepare the journal entry to record the first installment payment at December 31, 2018.4. Prepare the journal entry to record the second installment payment at December 31, 2019.5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interestfor notes of similar risk was 11%. Prepare the journal entry to record the purchase of the machine.
On 1.1 2016 YZ company leased Equipment from ABC company, the fair value of Equipment OMR680496 and useful life of it 5 years without residual value, the lessee paid rental payments of OMR123000 at the beginning of each year. The lessee's incremental borrowing rate 12%. The principal on 13/12/2016 should be: Select one: a. OMR123000 b. None of the options c. OMR225495 O d. OMR78169
At the beginning of 2016, VHF Industries acquired a machine with a fair value of $6,074,700 by issuing a fouryear, noninterest-bearing note in the face amount of $8 million. The note is payable in four annual installments of $2 million at the end of each year. Required: 1. What is the effective rate of interest implicit in the agreement? 2. Prepare the journal entry to record the purchase of the machine. 3. Prepare the journal entry to record the first installment payment at December 31, 2016. 4. Prepare the journal entry to record the second installment payment at December 31, 2017. 5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 11%. Prepare the journal entry to record the purchase of the machine.
On January 1, 2012, Enrich Company purchased a machine under the following terms:a. 100,000 downpaymentb. four annual payments of P200, 000, the first installment to be paid on December 31,2012The fair value of the machine is not clearly determinable on the date of acquisition.The prevailing rate of interest for this type of obligation is 10%. The present value factors at 10%for four periods are:Present value of 1 .683Present value of ordinary annuity of 1 3.170Required: How much is the cost of the machine_________________
Teari Company purchased a machine on September 1, 2021. The purchase agreement required Teari to pay an initial fee payment of P700,000 plus four P300,000 payments due every four (4) months, the first payment due December 31, 2021. The market interest rate is 12%. The present and future value tables at 4% for four (4) periods were as follows: Present value of P 1, 0.85; Present value of an ordinary annuity of P1, 3.63; Future value of P 1, 1.17, Future value of an ordinary annuity of P1, 4.25. What is the fair value of the note on December 31, 2021.
On 1.1 2016 YZ company leased Equipment from ABC company, the fair value of Equipment OMR680496 and useful life of it 5 years without residual value, the lessee paid rental payments of OMR123000 at the beginning of each year. The lessee's incremental borrowing rate 12%. The interest expense on 13/12/2016 should be: Select one: a. OMR 44831 O b. OMR44351 c. OMR 35451 O d. None of the options
On 1.1 2016 YZ company leased Equipment from ABC company, the fair value of Equipment OMR680496 and useful life of it 5 years without residual value, the lessee paid rental payments of OMR123000 at the beginning of each year. The lessee's incremental borrowing rate 12%. The balance on 1/1/2016 should be: Select one: a. OMR373594 O b. OMR123000 c. None of the options d. OMR474245
9. On 1 July 2015, Vertical Ltd leased a processing plant to Bell Ltd. The plant was purchased by Vertical Ltd on 1 July 2019 for its fair value of $959,424. The lease agreement contained the following provisions: Lease term 3 yearsEconomic life of plant 5 yearsPresent value of MLP $934,224Annual rental payment, in arrears (commencing 30/6/2020) $300,000Residual value at end of the lease term $157,594Residual guaranteed by lessee $127,594Interest rate implicit in lease 6%The lease is cancellable only with the permission of the lessor. Bell Ltd intends to return the processing plant to the lessor at the end of the lease term. The lease has been classified as a finance lease by both the lessee and the lessor.RequiredPrepare the lease receipt schedule for the lessor (show all workings
Daniel Company leased a new machine from Keriboomboom Company on January 1, 2016, under a lease with the following information: Annual rental payable at beginning of each lease year P400,000 Initial direct cost paid by the lessee 200,000 Lease term 10 years Useful life of machine 12 years Implicit interest rate 14% Daniel has the option to purchase the machine on January 1, 2016, by paying P500,000, which approximates the expected fair value of the machine on the option exercise date. On January 1, 2016, Daniel should record a capitalized leased asset at: Use 2 decimal points in computing for the PV
8. Michael Company leased equipment to Hay Corporation on July 1, 2012 for an eight-year period expiring June 30, 2020. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2012. The cash selling price of the equipment is P3,520,000 which reflects its present value, and the cost of the equipment on Michael's accounting records is P2,800,000. The lease is appropriately recorded as a dealer's lease. What is the amount of the resulting gross profit from this sale at the inception of the lease? a. P45,000 b. P90,000 c. P720,000 d. P1,280,000 Use the same information given in MC No. 8. What other revenue should Michael report in his income statement for year ended December 31, 2012? * a. P292,000 b. P146,000 c. P176,000 d. P352,000 e. P0
8. Michael Company leased equipment to Hay Corporation on July 1, 2012 for an eight- year period expiring June 30, 2020. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2012. The cash selling price of the equipment is P3,520,000 which reflects its present value, and the cost of the equipment on Michael's accounting records is P2,800,000. The lease is appropriately recorded as a dealer's lease. What is the amount of the resulting gross profit from this sale at the inception of the lease? * a. P45,000 O b. P90,000 O c. P720,000 d. P1,280,000
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