Looking for answers with complete solutions.1. At what amount should the "Right of Use Asset" account be initially recognized?2. How much is the "Right of Use Asset" account understated or overstated upon initial recognition?3. How much interest expense should have been recognized at year end, December 31, 2020 with regards to the lease transactions? 4. What is the adjusted balance of the lease liability as of December 31, 2020? 5. What amount of TOTAL LIABILITIES should be reflected on the December 31, 2020 statement of financial position of Dream corporation with regards to the lease transactions? 6. How much total depreciation expense should have been recognized at year end, December 31, 2020 with regards to the lease transactions? 7. What is the carrying amount of the "Right of Use Asset" on December 31, 2020?8. What is the carrying amount of the "Leasehold Improvement" on December 31, 2020?

You have been assigned to audit the financial statements of DREAM CORPORATION, a manufacturing company, for the calendar year 2020. Audit findings are as follows: LEASES On April 1, 2020, DREAM Corporation leased a factory equipment for 3 years at semi-annual rental of P350,000 payable every April 1 and October 1 starting at the lease inception. The equipment had an estimated useful life of 5 years. The lessee paid lease bonus amounting to P180,000 and direct lease expense which included installation and commissioning costs amounting to P120,000. The lessor will however reimburse DREAM Corporation 45% of the direct lease expense as a lease incentive. DREAM Corporation further estimated that it will incur P210,000 in the future as cost to dismantle and decommission the said equipment upon retirement. The implicit lease rate on the lease known to both parties at the lease inception which is also deemed relevant in the determination of the present value of any future retirement obligations is at 9%. The asset had an estimated salvage value of P150,000 after 3 years and P90,000 after 5 years. DREAM Corporation guaranteed the residual value of the asset. The lease agreement contained an option for DREAM Corporation to extend the lease for another 2 years but at a reduced annual rental of P500,000. Immovable physical improvements were further incurred on the leased building which costed DREAM Corporation P445,000. The said improvements were completed by May 31, 2020 and has a useful life of 4 years. At lease inception, it was not reasonably certain that DREAM Corporation will be exercising the option. The implicit lease rate known to both parties was at 9% while DREAM Corporation's incremental borrowing rate was at 12%. The ENTRIES made by your client, DREAM Corporation in relation to the lease for the year 2020 are as follows: April 1 Right of use asset P 2,346,000 Cash P 596,000 Lease Liability 1,750,000 May 31 Leasehold improvement 445,000 Cash 445,000 Oct 1 Lease liability 350,000 Cash 350,000