PROBLEM 1

On January 1, 2021, ABC Company sold machinery with carrying amount of P550,000 for P800,000, which is the fair value of the asset on this date, and then immediately leased the machine back for P160,000 annually payable in advance for five years. The implicit rate is 12%.

Using four decimal places as PV factors, which of the following will be part of the compound journal entry ABC Company will prepare on January 1, 2021?

(1 Point)

Debit Cash, P800,000

Credit Lease liability, P645,968

Credit Gain on Sale-Leaseback, P48,315

Debit Right-of-Use Machinery, P444,103

PROBLEM 2

n January 1,2020, an equipment of ABC Company with a carrying value of P 1,500,000 was sold at P 2,000,000 equal to its fair value to DEF Company. ABC immediately leased back the equipment from DEF Company with an annual rental of P 150,000 for 5 years, payable every December 31 of each year. The market rate of interest is 10%.

How much is the gain on sale leaseback to be recognized by ABC Company? (For present value factors, do not round off)

(1 Point)

P 568,618.02

P 426,463.51

P 1,073,536.49

P 357,845.49

PROBLEM 3

On May 1, 2021, ABC Company leased furniture and fixtures from XYZ Company under a one-year contract. The lease payments are as follows: First 2 months at P12,000 per month Next 4 months at P18,000 per month Next 3 months at P15,000 per month Last 3 months at P10,000 per month After the first year, the rent continues at P8,000 per month.

What are the amounts reported in ABC financial statements for the year 2021?

(1 Point)

Rent revenue of P114,000 and Rent receivable of P12,000

Rent revenue of P114,000 and Unearned rent of P12,000

Rent revenue of P126,000 and Rent receivable of P12,000

Rent revenue of P126,000 and Unearned rent of P12,000