On January 1, 20x1, Entity X sells a building to Entity Y for ₱900,000 cash and simultaneously leases the building back. Additional information follows: Fair value of building1,000,000 Carrying amount of building800,000 Remaining useful life of building10 years Lease term5 years Annual rent payable at the end of each year100,000 Implicit interest rate equal to Market rate12%The transfer qualifies as a sale under PFRS 15. What amount of gain should Entity X recognize at lease commencement date?0107,904263,244174,904

Computation of Present value of Lease rental Lease rental = 100000 x PVIFA (12%, 5years)…

Answered: On January 1, 20x1, Entity X sells a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 20x1, Entity X sells a building to Entity Y for ₱900,000 cash and simultaneously leases the building back. Additional information follows:

Fair value of building	1,000,000
Carrying amount of building	800,000
Remaining useful life of building	10 years
Lease term	5 years
Annual rent payable at the *end* of each year	100,000
Implicit interest rate equal to Market rate	12%

The transfer qualifies as a sale under PFRS 15. What amount of gain should Entity X recognize at lease commencement date?

0
107,904
263,244
174,904

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