Low value asset On April 1, 20X8, MRV Company enters into a 5-year lease of a Tablet.

Under the terms of the lease, rent for the first year is P8,000

and rent for years 2 through 5 is P12,500 per annum payable every March 31 starting March 31, 20X9.

However, as an inducement to enter the lease, the lessor granted MRV the first six months of the lease rent-free. MRV assesses that the lease is a lease of an underlying asset of low value and elects to apply the recognition exemptions of IFRS 16.

1. What amount shall be reported as lease expense for 2018? A. 8,100 B. 4,000 C. 5,100 D. 10,800

2. What amount shall be reported as operating lease payable on December 31, 2019? A. 4,100 B. 8,100 C. 6,800 D. 14,900

3. What amount shall be reported as operating lease payable on December 31, 2020? A. 10,250 B. 5,100 C. 6,800 D. 13,200

4. What amount shall be reported as lease expense for 2021? A. 12,000 B. 10,800 C. 12,500 D. 13,870

CORRECT ANSWERS:

1. A,

2. D,

3. D,

4. B

SHOW SOLUTION ON THE CORRECT ANSWER