Question
At the beginning of the current year, Galilee Company leased a machinery with the following information: Annual rental payable at the end of each year
At the beginning of the current year, Galilee Company leased a machinery with the following information:
Annual rental payable at the end of each year P1,000,000
Residual value guarantee 500,000
Payment to lessor to obtain a long-term lease 300,000
Cost of dismantling and restoring the asset 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%
PV of an ordinary annuity of 1 at 10% for 4 periods 3.17
PV of 1 at 10% for 4 periods 0.68
1) What is the initial lease liability?
A. P3,510,000
B. P4,000,000
C. P3,170,000
D. P4,010,000
2) What is the cost of right of use asset?
A. P4,250,000
B. P3,900,000
C. P4,200,000
D. P3,810,000
3) What is the depreciation for the current year?
A. P462,500
B. P925,000
C. P850,000
D. P965,000
4) What is the lease liability at yearend?
A. P2,510,000
B. P3,159,000
C. P2,681,000
D. P3,620,000
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