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    Activity Lease Part 1

    Uploaded by

    Eric Guapin
    activity purposes

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Activity Lease Part 1

    Uploaded by

    Eric Guapin
    19 views1 page
    activity purposes

    Original Title

    activity-Lease-part-1

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    © © All Rights Reserved

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    PDF, TXT or read online from Scribd

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    activity purposes

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    19 views1 page

    Activity Lease Part 1

    Uploaded by

    Eric Guapin
    activity purposes

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 1

    ACTIVITY NO.

    6 -LEASES- Part 1

    PROBLEM 1
    On January 1, 2023, Bulaga Company entered into a ten-year noncancelable lease requiring year-end payments of
    P1,000,000. Bulaga’s incremental borrowing rate is 12%, while the lessor’s implicit interest rate, known to Bulaga, is
    10%. Present value factors for an ordinary annuity for ten periods are 6.145 at 10% and 5.650 at 12%.

    On the same date, Bulaga Company paid initial direct cost of P200,000 in negotiating and securing the leasing
    arrangement. Ownership of the property remains with the lessor at expiration of the lease. There is no purchase option.
    The lease property has an estimated economic life of 12 years.

    Questions:
    1.1 What amount should be capitalized initially as cost of the right of use asset? ________________________
    1.2. What amount should be recognized initially as lease liability? __________________________
    1.3. What amount should be recognized as annual depreciation of the right of use asset?_________________

    PROBLEM 2
    On Dec. 31m 2023, Good Company signed a 7-year finance lease for an airplane. The airplane’s fair value was
    P8,415,000. The entity made the first annual lease payment of P1,530,000 on Dec. 31, 2023.

    The entity’s borrowing rate was 12%, and the interest rate implicit in the lease, which was known by Good, was 9%. The
    rounded present value factors for an annuity due are: 9% for 7 years, 5.5 ; 12% for 7 years, 5.1.

    Questions:
    2.1 What amount should be reported as lease liability on Dec. 31, 2023? _________________________
    2.2. What amount should be reported as interest expense for 2024? __________________________

    PROBLEM 3
    LBJ Company entered in to a lease of building on January 1, 2021 with the following information:

    Annual rental payable at the end of each year 400,000


    Lease term 5 years
    Useful life building 20 years
    Implicit interest rate 10%
    PV of an ordinary annuity of 1 at 10% for 5 periods 3.79

    The lease contained an option for the lessee to extend for a further 5 years. At the commencement date, the exercise of
    the extension option is not reasonably certain. After 3 years on January 1, 2024, the lessee decided to extend the lease
    for a further 5 years.

    New annual rental payable at the end of each year 500,000


    New implicit interest rate 8%
    PV of an ordinary annuity of 1 at 8% for 5 periods 3.99
    PV of 1 at 8% for 2 periods 0.86
    PV of an ordinary annuity of 1 at 8% for 2 periods 1.78

    Questions:
    3.1 What amount should be reported as depreciation for 2021?________________________
    3.2 What amount should be reported as lease liability on Dec.31, 2023?_______________________
    3.3 What amount should be reported a new lease liability on Jan. 1, 2024? ________________________
    3.4 What is the carrying amount of right of use asset on January 1, 2024? _______________________
    3.5 What amount should be reported as depreciation for 2024? __________________________

    Deadline: June 21, 2024, 10:00 pm

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