On January 1, 2017, Bishop enters into an 8-year lease contract for 7,500 square meters of office space. Annual lease payment is P300,000 payable on December 31 each year. On January 1, 2021, Bishop and the property owner agree to amend the original lease for the remaining 4 years to decrease the leased officespacetoonly4,500 square meters. As a result, the lease payment decreases to P195,000 per year. Bishop’s incremental borrowing rate is 5% in 2017 and 6% in 2021. 1. How much is the amount of lease liability to be recognized on January 1, 2017? a. P2,400,000 c. P1,938,964 b. P1,753,912 d. P1,653,250 2. How much should be recognzied as interest expense for the year ended 2020 relating totheleaseof7,500 square meters of office space? a. P96,948 c. P86,796 b. P76,135 d. P64,942 3. How much should be recognized as gain or loss on lease modification for the year ended2021?a. P37,721 gain c. P37,721 loss b. P37,425 gain d. None of the Choices 4. How much should be recognized as total of depreciation expense and interest expense for the year ended 2021? a. P195,320 c. P154,778 b. P117,057 d. None of the Choices
On January 1, 2017, Bishop enters into an 8-year lease contract for 7,500 square meters of office space. Annual lease payment is P300,000 payable on December 31 each year. On January 1, 2021, Bishop and the property owner agree to amend the original lease for the remaining 4 years to decrease the leased officespacetoonly4,500 square meters. As a result, the lease payment decreases to P195,000 per year. Bishop’s incremental borrowing rate is 5% in 2017 and 6% in 2021.
1. How much is the amount of lease liability to be recognized on January 1, 2017?
a. P2,400,000 c. P1,938,964
b. P1,753,912 d. P1,653,250
2. How much should be recognzied as interest expense for the year ended 2020 relating totheleaseof7,500 square meters of office space?
a. P96,948 c. P86,796
b. P76,135 d. P64,942
3. How much should be recognized as gain or loss on lease modification for the year ended2021?a. P37,721 gain c. P37,721 loss
b. P37,425 gain d. None of the Choices
4. How much should be recognized as total of
a. P195,320 c. P154,778
b. P117,057 d. None of the Choices
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