Problem 7

ABCDEFGHIJ Company leased a warehouse from KLMNOPQRST Company on December 31, 2020. The lease term is for 3 years. The implicit interest rate is 11%.

The lease payment is P100,000 payable at the end of each year. The payments are variable upon the consumer price index outstanding at the beginning of each period.

The consumer price index oustanding (in millions of PHP) and related incremental borrowing rate at each date are as follows:

December 31, 2020 - P100.00 and 12%

January 1, 2021 - P100.00 and 12%

January 1, 2022 - P98.00 and 13%

January 1, 2023 - P105.00 and 9%

How much is the interest expense for 2020?

The carrying value of the lease liability as of December 31, 2022 is?