Question - Taunt To JEER AT CO. leased a new machine from ridicule to mock, Inc. on January 1, 2001, under a lease with the following information:
Lease term: 10years
Annual rent payable at the end of each year P80,000
Useful life of machine 12years
Implicit interest rate 14%
Lessee's incremental borrowing rate 12%
The annual rental payment includes P6,000 to cover maintenance costs. The maintenance costs transfer services to TAUNT. The amount charged reflects the stand alone selling price of the maintenance services.
Requirements:
A. Provide the entries in 2001 and 2002
B. Determine the current and noncurrent portions of the lease liability on December 31, 2001.