At the beginning of current year, Vincenzo Company leased a machinery with the following information:

Annual rental payable at the end of each year 1,000,000

Residual value guarantee 500,000

Payment to lessor to obtain a long-term lease 300,000

Cost of dismantling and restoring the asset as required by contract at present value 390,000

Annual executory cost paid by lessee 50,000

Lease term 4 years

Useful life of machinery 8 years

Implicit interest rate 10%

Present value of an ordinary annuity of 1 at 10% for 4 periods 3.17

Present value of 1 at 10% for 4 periods 0.68

5. What is the initial lease liability? ____________

6. What is the cost of right of use asset? __________

7. What is the depreciation for current year? _____________

8. What is the lease liability at year-end? ___________

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Start-up Company prepared the following lease payments schedule for the lease of a machine from another entity. The machine had an economic life of six years. The lease agreement required four annual payments of P33,000 and the machine will be returned to the lessor at the end of the lease term.

Lease payment Interest expense Reduction of liability Balance of liability

7/1/2019 98,512

7/1/2020 30,000 9,851 20,149 78,363

7/1/2021 30,000 7,836 22,164 56,199

7/1/2022 30,000 5,620 24,380 31,819

7/1/2023 30,000 3,181 31,819 -

120,000 26,488 98,512 -

9. What is the amount of executory cost? ________

10. What is the residual value guarantee? ___________

11. What is the annual depreciation? ____________

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At the beginning of current year, The Uncanny Counter Company leased a building from a lessor with the following pertinent information:

Annual rental payable at the end of each year 1,000,000

Initial direct cost paid 400,000

Lease incentive received 100,000

Leasehold improvement 200,000

Purchase option that is reasonably certain to be exercised 500,000

Lease term 5 years

Useful life of building 8 years

Implicit interest rate 10%

PV of an ordinary annuity of 1 for 5 periods at 10% 3.79

Present value of 1 for 5 periods at 10% 0.62

12. What is the cost of the right of use asset? ____________

13. What is the depreciation for current year? __________

14. What is the interest expense for current year? _________

15. What is the lease liability at year-end? ____________