Ondoy Company leased an asset to another entity on January 1, 2021. A third party guaranteed the residual value of the asset under the lease, estimated to be P1,200,000 on January 1, 2026, the end of the lease term. The lease is properly classified as a direct financing lease. Annual lease payments are P1,000,000 due each December 31, beginning December 31, 2021. The last payment is due December 31, 2025. Both the lessor and lessee use 10% as the interest rate. The remaining useful life of the asset is 6 years at the commencement of the lease. 1. What is the net liability balance for the lessee on December 31, 2021? 2. What is the net asset balance for the lessor on December 31, 2022?
Ondoy Company leased an asset to another entity on January 1, 2021. A third party guaranteed the residual value of the asset under the lease, estimated to be P1,200,000 on January 1, 2026, the end of the lease term. The lease is properly classified as a direct financing lease. Annual lease payments are P1,000,000 due each December 31, beginning December 31, 2021. The last payment is due December 31, 2025. Both the lessor and lessee use 10% as the interest rate. The remaining useful life of the asset is 6 years at the commencement of the lease. 1. What is the net liability balance for the lessee on December 31, 2021? 2. What is the net asset balance for the lessor on December 31, 2022?
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 14E: Lessee and Lessor Accounting Issues The following information is available for a noncancelable lease...
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Ondoy Company leased an asset to another entity on January 1, 2021. A third party guaranteed the residual value of the asset under the lease, estimated to be P1,200,000 on January 1, 2026, the end of the lease term. The lease is properly classified as a direct financing lease. Annual lease payments are P1,000,000 due each December 31, beginning December 31, 2021. The last payment is due December 31, 2025. Both the lessor and lessee use 10% as the interest rate. The remaining useful life of the asset is 6 years at the commencement of the lease.
1. What is the net liability balance for the lessee on December 31, 2021?
2. What is the net asset balance for the lessor on December 31, 2022?
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