Mabuhay Company leased equipment on January 1, 2020. Annual rental to be paid at the end of each year is P160,000 for five years. The implicit rate for this lease is 6%. The present value of an ordinary annuity of 1 at 6% for 5 periods is 4.2124. On January 1, 2022, Mabuhay Company and the lessor agreed to amend the original terms of the lease by reducing the annual lease payment by P32,000 and increasing the implicit rate to 8%. The present value of an ordinary annuity of 1 at 8% for 3 periods is 2.5771. What is the amount of lease liability on January 1, 2020?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Mabuhay Company leased equipment on January 1, 2020. Annual rental to
be paid at the end of each year is P160,000 for five years. The implicit rate
for this lease is 6%. The present value of an ordinary annuity of 1 at 6% for 5
periods is 4.2124. On January 1, 2022, Mabuhay Company and the lessor
agreed to amend the original terms of the lease by reducing the annual
lease payment by P32,000 and increasing the implicit rate to 8%. The
present value of an ordinary annuity of 1 at 8% for 3 periods is 2.5771. What
is the amount of lease liability on January 1, 2020?

 

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