Question
Use the following information to answer items 24 to 28: On January 1, 2019, Taylor Company leased a machine with remaining useful of 14 years
Use the following information to answer items 24 to 28: On January 1, 2019, Taylor Company leased a machine with remaining useful of 14 years from Swift Leasing Corporation. The lease required 10 annual payments of P1,000,000 beginning immediately. The lease specified an interest rate of 12% and a purchase option of P1,000,000 at the end of the tenth year. The lessee is reasonably certain to exercise the purchase option. PV of an annuity due of 1 at 12% for 10 periods is 6.328; PV of 1 at 12% for 10 periods is 0.322 24. What amount should be recorded initially as cost of the right of use asset? A. 5,650,000 B. 6,328,000 C. 6,650,000 D. 7,328,000 25. What is the annual depreciation of the right of use asset? A. 452,000 B. 475,000 C. 632,800 D. 665,000 26. What total amount in relation to the lease shall be included in the income statement for the year ended 2019? A. 1,153,000 B. 1,273,000 C. 1,343,000 D. 1,463,000 27. Assuming the lessee exercise the purchase option on December 31, 2028, what amount shall be debited as cost of machine? A. 900,000 B. 1,000,000 C. 1,900,000 D. 2,000,000 28. Assuming the lessee did not exercise the purchase option on December 31, 2028, what amount shall be recognize as loss on finance lease? A. 0 B. 900,000 C. 1,000,000 D. 1,900,000
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