PROBLEM A:

Stockholm Corporation leased an equipment to Roman Co. on March 1, 2020. The lease expires on February 28, 2025. The annual rental is P900,000 payable every February 28 starting February 28, 2021. Additionally, Roman Co. paid P500,000 to Stockholm Co. as lease bonus and P250,000 as security deposit to be refunded upon expiration of the lease.

1. What amount of lease revenue should be reported for 2020?

2. What amount of lease revenue should be reported for 2021?

PROBLEM B:

Lisbon Company purchased a tractor on January 1, 2018 at a cost of P800,000 for the purpose of leasing it.

The tractor is estimated to have a useful life of 5 years with the residual value of P50,000. Depreciation is on a straight-line basis.

On April 1, 2018, Lisbon entered into a lease contract for the lease of the tractor for a term of two years up to March 31, 2020.

The lessee prepaid P300,000 as the lease fee for the period April 1, 2018 to March 31, 2019.

Lisbon paid P60,000 commission associated with negotiating the lease, P7,500 minor repairs and P5,000 transportation of the tractor to the lessee during the current year.

3. How much is the gross lease revenue for 2018?

4. How much is the depreciation expense to be recognized in 2018?

5. How much is the net lease revenue should be reported for the current year?

6. What is the carrying amount of the leased asset in the books of the lessor on December 31, 2018?