On January 1, 2019, Shirley Corporation leased a machinery from Joel Company on a five-year lease...

Transcribed Image Text:

On January 1, 2019, Shirley Corporation leased a machinery from Joel Company on a five-year lease term at P150,000 annual rental payments, paid in advance. There is a bargain purchase option on December 31, 2023 of P240,000. The economic life of the equipment is 15 years. The interest rate implicit in this lease which is known to Shirley is 12%. Required: a. At what amount should the asset be recorded on January 1, 2019? b. Prepare an amortization table for the entire term of the lease. c. How much depreciation will be taken up by Shirley for the year 2019? d. Prepare the entries in the books of Shirley to record the foregoing for the years 2019 and 2020. e. Assume that at the end of the lease term, Shirley exercised its purchase option. Give the entry for the exercise. f. Give the journal entry at the end of the lease term assuming that Shirley failed to exercise its bargain purchase option. On January 1, 2019, Shirley Corporation leased a machinery from Joel Company on a five-year lease term at P150,000 annual rental payments, paid in advance. There is a bargain purchase option on December 31, 2023 of P240,000. The economic life of the equipment is 15 years. The interest rate implicit in this lease which is known to Shirley is 12%. Required: a. At what amount should the asset be recorded on January 1, 2019? b. Prepare an amortization table for the entire term of the lease. c. How much depreciation will be taken up by Shirley for the year 2019? d. Prepare the entries in the books of Shirley to record the foregoing for the years 2019 and 2020. e. Assume that at the end of the lease term, Shirley exercised its purchase option. Give the entry for the exercise. f. Give the journal entry at the end of the lease term assuming that Shirley failed to exercise its bargain purchase option.

Answer rating: 100% (QA)

Answer To answer the questions we will go through the requirements one by one a Amount to Record the Asset on January 1 2019 To calculate the initial asset and liability recorded on the lease start da... View the full answer