1. What amount should be recorded initially as cost of the right of use asset?2. What is the annual depreciation of the right of use asset? Robbin Company leased a machine with remaining useful life of 14 years from Ready LeasingCompany. The lease required 10 annual payments of P1,000,000 beginning immediately.The lease specified an interest rate of 12% and a purchase option of P1,000,000 at the end ofthe tenth year. The lessee is reasonably certain to exercise the purchase option.Present value of an annuity due (in advance) of 1 at 12% for 10 periodsPresent value of 1 at 12% for 10 periods6.3280.322

Sometimes company gets the asset on lease means the ownership of the asset remains with the actual…

Answered: 1. What amount should be recorded…

1. What amount should be recorded initially as cost of the right of use asset? 2. What is the annual depreciation of the right of use asset?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

1. What amount should be recorded initially as cost of the right of use asset?

2. What is the annual depreciation of the right of use asset?

Robbin Company leased a machine with remaining useful life of 14 years from Ready Leasing
Company. The lease required 10 annual payments of P1,000,000 beginning immediately.
The lease specified an interest rate of 12% and a purchase option of P1,000,000 at the end of
the tenth year. The lessee is reasonably certain to exercise the purchase option.
Present value of an annuity due (in advance) of 1 at 12% for 10 periods
Present value of 1 at 12% for 10 periods
6.328
0.322

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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