show step by step solution

On December 31, 2015, Lessor Company signs a 10-year noncancelable lease agreement to lease a storage building from Lessee Company. The agreement requires equal rental payments of P720,000 beginning on December 31, 2015. The fair value of the building on December 31, 2015 is P4,400,000. The building has an estimated economic life of 12 years, with an unguaranteed residual value of P100,000. Lessor Company depreciates similar buildings on the straight-line method. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. The interest rate implicit in the lease is 12% per year. The yearly rental payment includes P24,075 of executory costs related to taxes on the property. PV of an annuity due of 1=6.32825; PV of ordinary annuity of 1=5.65022 and PV of 1=0.32197

• What amount should be capitalized as the cost of the leased storage building?
• what amount should be included in the current liabilities section of lessor's statement of financial position at December 31, 2016?
• what amount should be included in the noncurrent liabilities section of Lessor Company's statement of financial position at December 31, 2016?
• what is the total lease-related expenses to be reported in the income statement for the year ended December 31, 2016