Problem 1 On December 31, 2021, Chrysler Company signed a five-year, non-cancellable lease for a machine...

  

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Problem 1 On December 31, 2021, Chrysler Company signed a five-year, non-cancellable lease for a machine with Hyundai Company. The terms of the lease called for Chrysler Company to make annual payments of P80,000 in advance starting on December 31, 2021 and every December 31 thereafter. The machine has an estimated useful life of six years and a P40,000 unguaranteed residual value at the end of the five-year lease term. The machine reverts back to the lessor at the end of the five-year lease term. Chrysler Company uses the straight-line method of depreciation for all of its depreciable assets. The rate implicit in this contract, which is known to Chrysler is 12%. The market value of the machine is P340,000. (Use 3 decimal places for PV Factors) Prepare all the necessary journal entries for 2021, 2022 and 2023. Problem 2: On January 1, 2022 Robbins, Inc., leased a machine from Ready Leasing Co. The lease require 10 annual payments of P10,000 beginning immediately. The lease specifies an interest rate of 12% and a purchase option of P10,000 at the end of the tenth year, even though the machine's estimated value on that date is P20,000. It is reasonably certain that Robbins will exercise the purchase option. Robbins' incremental borrowing rate is 14%. 1. Prepare all the necessary journal entries for 2022, 2023, and 2024. 2. Prepare the journal entry at the end of the lease term if the lessee (a) exercised its option to purchase (b) revert back the leased asset to the lessor. Problem 1 On December 31, 2021, Chrysler Company signed a five-year, non-cancellable lease for a machine with Hyundai Company. The terms of the lease called for Chrysler Company to make annual payments of P80,000 in advance starting on December 31, 2021 and every December 31 thereafter. The machine has an estimated useful life of six years and a P40,000 unguaranteed residual value at the end of the five-year lease term. The machine reverts back to the lessor at the end of the five-year lease term. Chrysler Company uses the straight-line method of depreciation for all of its depreciable assets. The rate implicit in this contract, which is known to Chrysler is 12%. The market value of the machine is P340,000. (Use 3 decimal places for PV Factors) Prepare all the necessary journal entries for 2021, 2022 and 2023. Problem 2: On January 1, 2022 Robbins, Inc., leased a machine from Ready Leasing Co. The lease require 10 annual payments of P10,000 beginning immediately. The lease specifies an interest rate of 12% and a purchase option of P10,000 at the end of the tenth year, even though the machine's estimated value on that date is P20,000. It is reasonably certain that Robbins will exercise the purchase option. Robbins' incremental borrowing rate is 14%. 1. Prepare all the necessary journal entries for 2022, 2023, and 2024. 2. Prepare the journal entry at the end of the lease term if the lessee (a) exercised its option to purchase (b) revert back the leased asset to the lessor.

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Answer Part 2 1 On 1st January 2022 Robbins Inc will recognise the right of use ROU Mach... View the full answer