Homework answers / question archive / 1) On January 1, 2016, Canberra Company signed an eight-year non-cancellable lease for a new machine, requiring P150,000 annual payment at the beginning of each year

1) On January 1, 2016, Canberra Company signed an eight-year non-cancellable lease for a new machine, requiring P150,000 annual payment at the beginning of each year

Accounting

Share With

1) On January 1, 2016, Canberra Company signed an eight-year non-cancellable lease for a new machine, requiring P150,000 annual payment at the beginning of each year. The machine has a useful life of 12 years, with no residual value. Title passes to Canberra at the lease expiration date. Canberra uses straight line depreciation for all of its plant assets. On January 1, 2016, aggregate lease payments have a present value of P1,080,000 based on an appropriate rate of interest. What amount should be recorded as depreciation expense of the leased machine for 2016?

2) On January 1, 2016, Halcyon Company, as lessee, signed a five-year non-cancellable equipment lease with annual payment of P1,000,000 beginning December 31, 2016. Halcyon treated this transaction as a finance lease. The five lease payments have a present value of P3,790,000 at January 1, 2016, based on interest of 10%. What amount should Halcyon report as interest expense for the year ended December 31, 2016?