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  • Lecture 02 Lessee Accounting Purchase Option

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    Mary Jane Tan
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    The document provides information about lessee accounting for a company that leased a machine for 10 years with an option to purchase at the end of the lease for $500,000. It includes details like the annual rental payments, lease term, useful life, interest rates, and present values needed to record the transaction and amortization table. The company is reasonably certain to exercise the purchase option and the estimated residual value of the machine at the end of its life is $600,000.

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    The document provides information about lessee accounting for a company that leased a machine for 10 years with an option to purchase at the end of the lease for $500,000. It includes details like the annual rental payments, lease term, useful life, interest rates, and present values needed to record the transaction and amortization table. The company is reasonably certain to exercise the purchase option and the estimated residual value of the machine at the end of its life is $600,000.

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    © All Rights Reserved
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    2 views2 pages

    Lecture 02 Lessee Accounting Purchase Option

    Uploaded by

    Mary Jane Tan
    The document provides information about lessee accounting for a company that leased a machine for 10 years with an option to purchase at the end of the lease for $500,000. It includes details like the annual rental payments, lease term, useful life, interest rates, and present values needed to record the transaction and amortization table. The company is reasonably certain to exercise the purchase option and the estimated residual value of the machine at the end of its life is $600,000.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Sir Win – Accounting Lectures

    Jokes Tagalog
    Stories Legit Professor
    Life Lessons
    -----------------------------------------------------------------------------------------------
    ------------------------
    Lecture 02: Lessee Accounting. Purchase Option
    -----------------------------------------------------------------------------------------------
    ------------------------
    Lessee Company leased a machine on January 1, 2020 with the
    following pertinent information:

    Fixed rental payment at the end of each year 1,000,000


    Lease term 10 years
    Useful life of machine 12 years
    Incremental borrowing rate 14%
    Implicit interest rate 12%
    Present value of an ordinary annuity of 1 for 10 periods at
    14% 5.2161
    12% 5.6502
    Present value of 1 for 10 periods at
    14% 0.2697
    12% 0.3220

    Lessee Company has the option to purchase the machine upon


    the lease expiration on January 1, 2030 by paying P500,000.

    The lessee is reasonably certain to exercise the purchase option


    at the commencement date of the lease.

    The estimated residual value of the machine at the end of the 12-
    year life is P600,000.

    Required:
    1. Journal entries for 2020
    2. Amortization Table
    Sir Win – Accounting Lectures
    Jokes Tagalog
    Stories Legit Professor
    3.
    Life Lessons Journal
    entries on January 1, 2030
    a. If the lessee does exercise the purchase option
    b. If the lessee does not exercise the purchase option

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