CASE 1: MTC Company leases an equipment for five years. During the lease period, MTC needs

to pay P500,000 each year for using the equipment. The rate implicit in the lease is eight

percent. MTC Company treats the lease as an operating lease.

Round off your answers to two decimal places. Include comma as separator.

1. How much is the increase in liabilities of MTC upon inception of the lease?

2. Assuming MTC Company uses a straight line depreciation method with no salvage value in all

its assets, how much is the company's non-operating expense for the first year?

3. How much is the book value of the lease-related liability at the beginning of year 3?