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?
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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education