Question
Ecocentrix Limited leased an equipment from Corex Corp on January 1, 2021. Given the following information, answer the questions that follows: Annual rental payable at
Ecocentrix Limited leased an equipment from Corex Corp on January 1, 2021. Given the following information, answer the questions that follows:
Annual rental payable at end of each year 500,000
Lease term 8 years
Useful life of the 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
Ecocentrix Ltd has an option to purchase the equipment for P500,000 at the end of the lease term. There is reasonable certainty that the entity shall exercise the option. Ecocentrix incurred a direct cost of P200,000.
a. What is the initial cost of the Right-to-Use asset? b. What is the interest expense for the current year? c. What is the Lease Liability at the end of the year? d. What is the depreciation expense at year end?
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