On January 1, 2022, Buffet Trading Corp. leased machine by signing a 4-year lease contract. Annual rental is P1,742,174 payable at the beginning of each year starting January 1, 2022. Buffet guarantees the residual value of P1,200,000 at the end of the lease term. The asset’s useful life is 5 years, at the end of which, its residual value is estimated to be P80,000. Buffet uses straight-line depreciation. The interest implicit in the lease is 10%. Present value of annuity due of 1 for 4 periods at 10% is 3.48685. Present value of 1 at 10% for 4 periods is 0.68301 What is the carrying value of the right-of-use machine on December 31, 2022?
On January 1, 2022, Buffet Trading Corp. leased machine by signing a 4-year lease contract. Annual rental is P1,742,174 payable at the beginning of each year starting January 1, 2022. Buffet guarantees the residual value of P1,200,000 at the end of the lease term. The asset’s useful life is 5 years, at the end of which, its residual value is estimated to be P80,000. Buffet uses straight-line depreciation. The interest implicit in the lease is 10%. Present value of annuity due of 1 for 4 periods at 10% is 3.48685. Present value of 1 at 10% for 4 periods is 0.68301 What is the carrying value of the right-of-use machine on December 31, 2022?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2022, Buffet Trading Corp. leased machine by signing a 4-year lease contract. Annual rental is P1,742,174 payable at the beginning of each year starting January 1, 2022. Buffet guarantees the residual value of P1,200,000 at the end of the lease term. The asset’s useful life is 5 years, at the end of which, its residual value is estimated to be P80,000. Buffet uses straight-line depreciation. The interest implicit in the lease is 10%. Present value of annuity due of 1 for 4 periods at 10% is 3.48685. Present value of 1 at 10% for 4 periods is 0.68301
What is the carrying value of the right-of-use machine on December 31, 2022?
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