Reference no: EM132578863
Question 1. Louis Company leased a machine from Millennium Company on January 1,2014. The first annual payment was made on January 1, 2015. The machine has an economic life of six years. The lease agreement requires four annual payments of P33,000, including P3,000 annual payment for repairs and maintenance. The machine will be returned to Millennium Company at the end of the lease term and Louis Company guarantees a residual value of P5,000. Interest implicit in the lease is 10%, which is known to Louis.
For the year ended December 31,2015, what would Louis Company record in relation to the lease?
Question 2. Use the same information given in 1. How much annual depreciation expense should Louis Company record?
Question 3. Use the same information given in 1. In its notes to the financial statements at December 31,2016, Louis Company disclose minimum lease payments of
Question 4. Use the same information given in 1. If Millennium Company recorded the net investment in lease higher than the liability initially recorded by Louis Company, the variance could be due to
Question 5. Use the same information given in 1 and assume that on January 1, 2017, lease payment included an amount of P5,000 for exceeding a limit for machine usage hours specified in the lease agreement.
Louis Company would account for this charge as_
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