1. What is the initial lease liability? 2. What is the cost of the right of use asset? 3. What is the gain on right transferred to buyer-lessor? and what is the annual rental income of buyer-lessor?
1. What is the initial lease liability? 2. What is the cost of the right of use asset? 3. What is the gain on right transferred to buyer-lessor? and what is the annual rental income of buyer-lessor?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
At the start of the current year, Grace Company sold a building and
immediately leased it back, The following data pertain to the sale and
leaseback transaction: Sale price at above fair value P9M; FV of the building
is P8M, with carrying amount of P7,200,000 and annual rental payable at
the end of each year at P600,000. The remaining life of the building is 20
years and the lease term is 4 years. The implicit interest rate is 12%. PV of an
ordinary annuity of 1 at 12% for 4 years is 3.037.
1. What is the initial lease liability?
2. What is the cost of the right of use asset?
3. What is the gain on right transferred to buyer-lessor? and what is the annual rental income of buyer-lessor?
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