Answered: a. If the sales price is P1,000,000…

a. If the sales price is P1,000,000 which is equal to fair value compute the following under the seller-lessee accounting i. Lease liability ii. Right of use Asset iii. Gain or Loss

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

Problem 6. Sales and Leaseback
On
Januar y
1
20х1,
Entity
sold
building
to
Entity
and
a
simultaneously leased it back. Additional information follows :
Fair value of building
1,000,000
Carrying amount of building
800,000
Remaining useful life of building
10 years
Lease Term
5 years
Annual rent payable at the end of each year
100,000
Implicit interest rate equal to market rate
12%
The transfer qualifies as a sale.
Requirements (Independent cases) :
а. If
the sales price is P1,000,000 which is equal to fair value
compute t he following under the seller-lessee accounting
i.
Lease liability
ii.
Right of use Asset
iii.
Gain or Loss
iv.
Journal entries on January 1, 20x1
b. If the sales price is P1,000,000 which is equal to fair value
compute the following under the buyer-lessor acco unting
i.
Gross Investment
ii.
Net Investment
iii.
Unearned Interest Income
iv.
Journal entries on January 1, 20x1
c. Same requirements in
a and b but the sales price is P1,100,000
which is above the fair value of the asset
d. Same requireme nts
in
a and b but the sales price is P900,000
which is below the fair value of the asset

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