Hope Manufacturing Company leases a machine to the Charity Company at a total rental of P2,000,000, payable in 5 annual installment sin the following declining pattern: 30% in the first year, 20% in each of the next 2 years

Transcribed Image Text:

Hope Manufacturing Company leases a machine to the Charity Company at a total rental of P2,000,000, payable in 5 annual installment sin the following declining pattern: 30% in the first year, 20% in each of the next 2 years and 15% in each of the last 2 years. The lease begins on January 1, 2020. The lease does not transfer substantially the risks and rewards incidental to the ownership of the asset. Hope incurred initial direct costs of P60,000 in obtaining the lease. The machine cost Hope P2,200,000 on January 1, 2020 and has an estimated useful life of 10years with an estimated residual value of P200,000. Hope uses the straight-line method of depreciation on its equipment. Hope manufacturing Company reports on a calendar-year basis. REQUIRED: a.) Prepare all the journal entries relating to the lease in the books of Hope Manufacturing Company for years 2020 and 2021. b.) Identify the accounts and the amounts that will be presented on the 2020 financial statements of Hope Manufacturing Company. Hope Manufacturing Company leases a machine to the Charity Company at a total rental of P2,000,000, payable in 5 annual installment sin the following declining pattern: 30% in the first year, 20% in each of the next 2 years and 15% in each of the last 2 years. The lease begins on January 1, 2020. The lease does not transfer substantially the risks and rewards incidental to the ownership of the asset. Hope incurred initial direct costs of P60,000 in obtaining the lease. The machine cost Hope P2,200,000 on January 1, 2020 and has an estimated useful life of 10years with an estimated residual value of P200,000. Hope uses the straight-line method of depreciation on its equipment. Hope manufacturing Company reports on a calendar-year basis. REQUIRED: a.) Prepare all the journal entries relating to the lease in the books of Hope Manufacturing Company for years 2020 and 2021. b.) Identify the accounts and the amounts that will be presented on the 2020 financial statements of Hope Manufacturing Company.

• Expert Answer

a Journal entries relating to the lease in the books of Hope Manufacturing Company for years 2020 an View the full answer