At the beginning of the current year, CC leasedan equipmentfrom alessorwith the following pertinent information.

Annual rental payable at the end of each year

500,000

Lease term

8 years

Useful life of equipment

10 years

Implicit Interest Rate

10%

PV of an ordinary annuity of 1 for 8 periods at 10%

5.33

Present Value of 1 for 8 periods at 10%

0.47

The entity has the option to purchase the equipment on the expiration of the lease term by payingP500,000.

There is reasonable certainty that the entity shall exercise the option. The entity incurred initial direct cost of P200,000.

1.What is the initial cost of the right of use asset?

2.What is the interest expense for current year?

3.What is the lease liabilityat year-end?

4.What is the depreciation for current year?