On December 31, 2020, Lesley Co. signed a 10-year noncancelable lease agreement to lease a storage building from Stark Company. The following information pertains to this lease agreement: The agreement requires equal rental payments of ₱720,000 beginning on December 31, 2020. The fair value of the building on December 31, 2020 is ₱4,400,000. The building has an estimated economic life of 12 years, with an unguaranteed residual value of ₱100,000. Lesley depreciates similar buildings on the straight-line method. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. The interest implicit in the lease is 12% per year. The yearly rental payment includes ₱20,705 of executory costs related to taxes on the property. QUESTIONS: (Round off present value factors to 5 decimal places) 1. What amount should be capitalized as the cost of the leased storage building? 2. What amount should be included in the current liabilities section of Lesley’s statement of financial position at December 31, 2021? 3. What amount should be included in the noncurrent liabilities section of Lesley’s statement of financial position at December 31, 2021? 4. What is the total lease-related expenses to be reported in Lesley’s income statement for the year ended December 31, 2021?
On December 31, 2020, Lesley Co. signed a 10-year noncancelable lease agreement to lease a storage
building from Stark Company. The following information pertains to this lease agreement:
The agreement requires equal rental payments of ₱720,000 beginning on December 31, 2020.
The fair value of the building on December 31, 2020 is ₱4,400,000.
The building has an estimated economic life of 12 years, with an unguaranteed residual value of
₱100,000. Lesley
The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.
The interest implicit in the lease is 12% per year.
The yearly rental payment includes ₱20,705 of executory costs related to taxes on the property.
QUESTIONS: (Round off present value factors to 5 decimal places)
1. What amount should be capitalized as the cost of the leased storage building?
2. What amount should be included in the current liabilities section of Lesley’s statement of
financial position at December 31, 2021?
3. What amount should be included in the noncurrent liabilities section of Lesley’s statement of
financial position at December 31, 2021?
4. What is the total lease-related expenses to be reported in Lesley’s income statement for the
year ended December 31, 2021?
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