On December 31, 2018, Justice Company leased machinery for 10 years. The company contracted to P400,000 annual rent on December 31, 2018, and on December 31 of each of the next nine years. The lease liability was presented at P2,300,000 on December 31, 2018. The equipment's useful life is 12 years, and the interest rate implicit in the lease is 10%. The company used the straight line method to depreciate all machinery.

1. In recording the December 31, 2020, payment by what amount should the lease liability be reduced? A. 170,000 B. 187,000 C. 231,000 D. 400,000 2. What is the interest expense for 2021? A. 145,900 B. 169,000 C. 194,300 D. 213,000

with solution