Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2020, Marian Company sold a machinery to Marjorie Company for P2,200,000, an amount that is equal to its fair value. Because of

On January 1, 2020, Marian Company sold a machinery to Marjorie Company for P2,200,000, an amount that is equal to its fair value. Because of the entity's commitments to its customers to provide their needs for the next four years, Marian Company simultaneously leased back the machinery. The transfer of the asset to the buyer qualified to be accounted for sale under IFRS 15. Information relating to this transaction follows:

Carrying amount of machinery 1,700,000

Remaining useful life of machinery8 years

Lease term4 years

Annual rent payable at the end of each year500,000

Market rate of interest10%

1) How much is the gain on sale leaseback recognized by Marian Company at January 1, 2020?

a) P500,000

b) P360,216

c) P139,784

d) P125,000

2) Using the preceding data, what are the amounts recorded by Marian Company for the right-of-use asset and lease liability, respectively, at January 1, 2020?

a) P1,224,734; P1,584,950

b) P1,584,950; P1,224,734

c) P2,051,112; P2,200,000

d) P2,200,000; P1,700,000

Please insert your solutions and explanations. Thank you

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Accounting

Authors: Jill Collis, Andrew Holt, Roger Hussey

3rd Edition

113752149X, 9781137521491

More Books

Students also viewed these Accounting questions

Question

In the G/M/1 model if G is exponential with rate show that = /.

Answered: 1 week ago

Question

1. Maintain my own perspective and my opinions

Answered: 1 week ago