1, 2019 is P4,478,000. The building has an estimated economic life of 12 years. Unguaranteed residual value at the end of 10 years is P150,000. Implicit rate is 12%.
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On July 1, 2019, the Manaow Corp., signs a 10-year non-cancelable lease agreement for a storage building owned by Del Inc. The following information pertains to the lease agreement.
- Annual rental payment is P750,000 beginning July 1, 2019. The rental payment includes P50,000 for taxes and insurance.
- The fair value of the building on July 1, 2019 is P4,478,000.
- The building has an estimated economic life of 12 years. Unguaranteed residual value at the end of 10 years is P150,000.
- Implicit rate is 12%.
Under IFRS 16, how much is the impact of the lease transaction to the income statement of Manaow Corp. dated December 31, 2019?
A.P495,271
B.P470,271
C.P433,357
D. P408,357
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- On January 1, 2020, Nelson Co. leased a building to Wise Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,500,000 (unguaranteed). 2. The leased building has a cost of $4,000,000 and was purchased for cash on January 1, 2020. 3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. 4. Lease payments are $275,000 per year and are made at the beginning of the year. 5. Wise has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Wise. 6. Both the lessor and the lessee are on a calendar-year basis. Instructions a. Prepare the journal entries that Nelson should make in 2020. b. Prepare the journal entries that Wise should make in 2020. c. If Wise paid $30,000 to a real estate broker on January 1, 2020, as a fee for finding the lessor, what is the…On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of $100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is $2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswell’s incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of $7,000 annually,…On December 31, 2019, Windsor Corporation signed a 5-year, non-cancelable lease for a machine. The terms of the lease called for Windsor to make annual payments of $8,092 at the beginning of each year, starting December 31, 2019. The machine has an estimated useful life of 6 years and a $4.900 unguaranteed residual value. The machine reverts back to the lessor at the end of the lease term. Windsor uses the straight-line method of depreciation for all of its plant assets. Windsor's incremental borrowing rate is 15%, and the lessor's implicit rate is unknown. Prepare all necessary journal entries for Windsor for this lease through December 31, 2020. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places eg. 5,275.) Date Account Titles and Explanation Debit Credit (To record the lease) (To record first lease payment) (To record amortization of the…
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