Problem 2

On January 1, 200, BB Co. signed a long-term lease for an office building. The term of the lease required BB Co. To pay P100,000 annually beg. December 31, 2020, and continuing each year for 30 years. On January 1, 2020, the present value of the lease payments is P1,125,000 at the 8% interest rate implicit in the lease. What amount should be reported as lease liability on December 31, 2020?

A. 1,025,000B.1,115000C. 1,125,000D. 2,900,000

Problem 3

At the beginning of the current year, CC leased an equipment from a lessor with the following pertinent information.

Annual rental payable at the end of each year

500,000

Lease term

8 years

Useful life of equipment

10 years

Implicit Interest Rate

10%

PV of an ordinary annuity of 1 for 8 periods at 10%

5.33

Present Value of 1 for 8 periods at 10%

0.47

The entity has the option to purchase the equipment on the expiration of the lease term by paying P500,000.

There is reasonable certainty that the entity shall exercise the option. The entity incurred initial direct cost of P200,000.

1. What is the initial cost of the right of use asset?

A. 2,900,000B. 3,100,000C. 2,865,000D. 0

2. What is the interest expense for current year?

A. 290,000B. 310,000C. 266,500D. 316,500

3. What is the lease liability at year-end?

A. 2,690,000B. 2,790,000C. 2,398,500D. 2,848,500

4. What is the depreciation for current year?

A. 310,000B. 387,500C. 290,000D. 362,500

Problem 4

DD Inc. is engaged in leasing equipment. Such equipment was delivered to a lessee on January 1, 2019 under a direct financing lease with the following provisions:

Cost of Equipment

4,361,200

Unguaranteed Residual Value

200,000

Useful life and lease term

8 years

Implicit Interest Rate

10%

Present value of an ordinary annuity of 1 for 8 years at 10%

5.335

Present value of 1 for 8 years at 10%

0.466

The annual rental is payable at the end of each year. The equipment will revert to the lessor upon the lease expiration.

What is the annual rental over the lease term?

A. 800,000B. 817,470C. 779,980D. 834,940

Problem 5

On January 1, 2019, EE Inc. (Lessor) Leased a machine to a FF Co. (Lessee). The machine had an original cost of P6,000,000. The lease term is 5 years and the implicit interest rate on the lease is 15%. The lease is properly classified as a direct financing lease.

The annual lease payments of P1,730,541 are made each December 31. The machine reverts to Lessor at the end of the lease term, at which time the residual value is unguaranteed.

The PV of 1 at 15% for 5 periods is .4972, and the PV of an ordinary annuity of 1 at 15% for 5 periods is 3.3522.

At the commencement of the lease on January 1, 2019, what is balance of Lessor's net receivable and lease liability?

Lease ReceivableLessee Liability

A. 6,000,0006,000,000

B. 5,801,1205,801,120

C. 6,000,0005,801,120

D. 5,801,1206,000,000

please explain how did u get the answer, It will be a big help for me to understand it more. Thank you.