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Accounting
e of the rig

e of the rig

FINANCIAL ACCOUNTING
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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4. What is the carrying value of the right of use asset on December 31, 2021?

₱ 2,488,889
 
 
 
₱ 2,750,000
 
 
 
₱ 2,520,000
 
 
 
₱ 2,666,667
TWO Corporation entered into a nine-year lease on a warehouse on December 31, 2020. The estimated useful life of the warehouse on the date of the agreement is 12 years. The lease is non-renewable, and the warehouse reverts to the lessor at the end of the lease term. Lease payment of P500,000 is due annually starting December 31, 2021, and every December 31 thereafter. The cost of restoring the underlying asset to its original condition as required by the contract is estimated at the present value of P200,000. The interest rate implicit in the lease is 9%. The present value of an ordinary annuity of 1 for nine years at 9% is 5.6.
Transcribed Image Text:TWO Corporation entered into a nine-year lease on a warehouse on December 31, 2020. The estimated useful life of the warehouse on the date of the agreement is 12 years. The lease is non-renewable, and the warehouse reverts to the lessor at the end of the lease term. Lease payment of P500,000 is due annually starting December 31, 2021, and every December 31 thereafter. The cost of restoring the underlying asset to its original condition as required by the contract is estimated at the present value of P200,000. The interest rate implicit in the lease is 9%. The present value of an ordinary annuity of 1 for nine years at 9% is 5.6.
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