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Answer all the questions and show the solution in good accounting form. Thank you! Problem 2: FINANCE LEASE CASE 1: On January 1, 2020, EEE
Answer all the questions and show the solution in good accounting form. Thank you!
Problem 2: FINANCE LEASE CASE 1: On January 1, 2020, EEE Corp. leased a warehouse for 5 years at an annual rental of P575,000 payable every December 31. The equipment had an estimated life of 8 years and shall revert back to the lessor at the expiration of the lease term. The lessee paid the lessor a lease bonus of #250,000 and was also responsible as per the lease agreement to pay the broker fees and commission amounting to P180,000. As an incentive however, the lessor shall reimburse EEE Corp. 75% of the said initial direct cost. The implicit lease rate known to both parties was at 12% while EEE Corporation's incremental borrowing rate was at 10%. Requirements: (Use a PV FACTOR rounded off to 4 decimal places) 5. Initial cost of the Right of Use Asset 6. Interest expense for 2020 7. Carrying value of the Lease Liability as of December 31, 2021 8. Depreciation expense on the Right of Use Asset in 2020 (under Straight Line Method) 9. Carrying value of the Right of Use Asset as of December 31, 2021Step by Step Solution
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