3.6243 Problem 10-7 (IFRS) On December 31, 2020, Eden Company leased an equipment with the...
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3.6243 Problem 10-7 (IFRS) On December 31, 2020, Eden Company leased an equipment with the following terms: Annual rent payable in advance on December 31 of each year 420,000 Estimated residual value at end of lease term 300,000 Residual value guarantee by lessee 200,000 Lease term 4 years Economic life of equipment 6 years Implicit interest rate 7% PV of an annuity of 1 in advance at 7% for 4 periods PV of 1 at 7% for 4 periods .7629 Included in the annual rental is an amount of P20,000 to cover reimbursement for insurance paid by the lessor. The directors of Eden Company have indicated that they intend to return the asset to the lessor at the end of the lease term. Required: 1. Prepare a table of amortization of the lease liability and interest expense. 2. Prepare journal entries for 2020 and 2021 on the books of Eden Company 3. Prepare journal entry to record the return of the equipment to the lessor on December 31, 2024. Assume the fair value of the equipment is P50,000. 361
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