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Seatwork On Leases

1. The document provides information on three different lease agreements for various companies. It includes details like lease terms, annual rentals, implicit interest rates, and questions asking to prepare related journal entries for the leases. 2. For the first lease agreement, it provides details for Lessee Company's building lease with annual rent of $2M over 5 years and asks to prepare 2019 entries and entries at end of lease term when building will be purchased. 3. For the second lease of Cartel Company, it gives rental of $800K over 5 years and asks for 2019-2021 entries, and entries in 2022 when lease was extended for additional 5 years. 4. For the third lease of Old Town

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525 views1 page

Seatwork On Leases

1. The document provides information on three different lease agreements for various companies. It includes details like lease terms, annual rentals, implicit interest rates, and questions asking to prepare related journal entries for the leases. 2. For the first lease agreement, it provides details for Lessee Company's building lease with annual rent of $2M over 5 years and asks to prepare 2019 entries and entries at end of lease term when building will be purchased. 3. For the second lease of Cartel Company, it gives rental of $800K over 5 years and asks for 2019-2021 entries, and entries in 2022 when lease was extended for additional 5 years. 4. For the third lease of Old Town

Uploaded by

mitakumo uwu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Name: __________________________________________________ Score: _____________

Intermediate Accounting 2
Seatwork: Lessee Accounting

Instruction: Show your solution in good form for each item. Final answers which require
solutions should be boxed. Do not round off while in the process of computing for the answer.
Only final answers are rounded off in 2 decimal places.

1. On January 1, 2019, the Lessee Company leased a building with a useful life of 8 years from the
Lessor Company. The lease term is for a period of 5 years. The annual rental is P2,000,000
payable every December 31. The Lessee Company incurred and paid P200,000 associated with
the contract of lease. A P300,000 lease incentive was received by the Lessee Company at
commencement of the lease. The Lessee Company has the option to purchase the building at the
end of the lease term and it is reasonably certain that the option will be exercised. The implicit
rate is 10%.
a. Prepare necessary entries in 2019.
b. Prepare necessary entries at the end of the lease term and the actual purchase of the
kbuilding.

2. The following information pertains to a leased contract entered into by Cartel Company, lessee,
on January 1, 2019:
Lease Term 5 years
Useful Life of the leased asset 20 years
Annual renal at yearend P800,000
Implicit rate 10%

The lease contract contains an option for Cartel Company to extend for another 5 years but at the
commencement of the lease, the exercise of the option is no reasonably certain, however, on
January 1, 2022, the lessee decided to extend the lease term by another 5 years. However, the
annual rental at the start of the 6th year will be P1,000,000 and the new implicit rate is 8%.
a. Prepare necessary entries for 2019 to 2021.
b. Ay as I Prepare necessary entry on January 1, 2022 and December 31, 2022.

3. On January 1, 2019, Old Town Company entered into a lease to use the ground floor up to the
fifth floor of a 12-storey building. RAnnual rental payable at year-end is P1,000,000. Lease term
is for a period of five years. Implicit interest rate is 10%. On January 1, 2021, the lessee and the
lessor agreed to amend the original term of the lease with the following: The lessee will continue
to use he first three floors while the other two floors will be terminated. Revised annual rental is
P750,000. Implicit rate is 8%
a. Prepare journal entries for 2019-2021.

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