On January 1, 2020, Vcut Company entered in a five-year lease agreement with rentals of P100,000 payable at yearend for the first three years and P150,000 payable at the succeeding yearends. At an implicit interest rate of 10%, the lease liability and right of use asset was initially recorded at P475,322. The asset will revert to the lessor at a guaranteed residual value at the end of the lease term. The fair value of the asset on December 31, 2024 is P35,000. How much is the carrying amount of the lease liability on December 31, 2022? How much is the carrying amount of the right of use asset as of yearend 2021? How much is the total amount to be reflected on the 2024 profit or loss arising from the lease?

On January 1, 2020, Vcut Company entered in a five-year lease agreement with rentals of P100,000 payable at yearend for the first three years and P150,000 payable at the succeeding yearends. At an implicit interest rate of 10%, the lease liability and right of use asset was initially recorded at P475,322. The asset will revert to the lessor at a guaranteed residual value at the end of the lease term. The fair value of the asset on December 31, 2024 is P35,000. How much is the carrying amount of the lease liability on December 31, 2022? How much is the carrying amount of the right of use asset as of yearend 2021? How much is the total amount to be reflected on the 2024 profit or loss arising from the lease?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 4P: Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides...

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

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How much is the carrying amount of the lease liability on December 31, 2022?
How much is the carrying amount of the right of use asset as of yearend 2021?
How much is the total amount to be reflected on the 2024 profit or loss arising from the lease?

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