beginning of each lease year and (2) at the end of each leaseP50,000. How much are the carrying amounts of the (1) right-2. (Continuationm of Scenario 1) The machine reverts back to April,Inc. at the end of the lease term. Sunset Co. uses the straightline method of depreciation. How much are the lease-relatedexpenses recognized in 20x2, if the rentals are due (1) at theyear?Rent due at endRent due at beginningDepreciation135,181Depreciation122,891Interest expenseInterest expense115,181106,699122,891115,180126,986151,804a.151,804122,891115,180b.266,986135,181115,181122,891с.d.106,6993. (Continuation of Scenario 1) How much are the current andnoncurrent portions of the lease liability on December 31, 20x1if the rentals are due (1) at the beginning of each lease year and(2) at the end of each lease year?Rent due at endRent due at beginningNoncurrentCurrentNoncurrentCurrent1,066,98684,8201,066,984200,00093,30193,301a.84,820122,8911,066,984973,685973,685b.1,151,8041,066,984C.d.84,8191,066,98684,820Scenario 2: Residual value guarantee4. The lease payments are due at the end of each year. Sunset Co.guarantees that April, Inc. will realize P80,000 from selling themachine to another party at the end of the lease term. Atcontract inception, Sunset Co, estimates that the fair value lessdisposal costs of the machine at the end of the lease termwhen the machine is reverted back to April, Inc., winof-use asset and (2) lease liability on December 31, 20x1?a. 1,116,431; 1,164,527b. 1,044,431; 1,164,527c. 1,141,781; 1,080,980d. 1,121,431; 1,080,980 Fact pattern for the nine (9) independent scenarios below:PROBLEM 4: MULTIPLE CHOICE-COMPUTATIONALOn January 1, 20x1, Sunset Co. leased a machine from April, Inc.Information on the lease is as follows:Annual rentP200,000Lease term10 years12 yearsUseful life of machineImplicit interest rateLessee's incremental borrowing rate10%11%Scenario 1: Rent due at beg. of year vs. Rent due at end. of year1. How much are the carrying amounts of the right-of-use assetand lease liability on December 31, 20x1, if the rentals are due(1) at the beginning of each lease year and (2) at the end of eachlease year?Rent due at beginningLease liabilityRent due at endRight-of-use asset1,266,986Right-of-use asset1,151,804Lease liability1,106,022a.1,216,6251,266,9861,151,804b.1,216,6251,106,0221,266,9861,106,0221,151,804C.1,266,9861,106,0221,216,625d.1,216,6251,151,804April

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On January 1, 20x1, Sunset Co. leased a machine from April, Inc. Information on the lease is as follows: Annual rent P200,000 Lease term 10 years 12 years Useful life of machine Implicit interest rate Lessee's incremental borrowing rate 10% 11% Scenario 1: Rent due at beg. of year vs. Rent due at end. of year 1. How much are the carrying amounts of the right-of-use asset and lease liability on December 31, 20x1, if the rentals are due (1) at the beginning of each lease year and (2) at the end of each lease year? Rent due at beginning Lease liability 1,216,625 1,151,804 1,266,986 1,106,022 Rent due at end Lease liability Right-of-use asset 1,151,804 1,216,625 1,106,022 Right-of-use asset 1,266,986 a. 1,106,022 b. 1,266,986 1,106,022 1,216,625 1,151,804 C. 1,151,804 d. 1,266,986 1,216,625

On January 1, 20x1, Sunset Co. leased a machine from April, Inc. Information on the lease is as follows: Annual rent P200,000 Lease term 10 years 12 years Useful life of machine Implicit interest rate Lessee's incremental borrowing rate 10% 11% Scenario 1: Rent due at beg. of year vs. Rent due at end. of year 1. How much are the carrying amounts of the right-of-use asset and lease liability on December 31, 20x1, if the rentals are due (1) at the beginning of each lease year and (2) at the end of each lease year? Rent due at beginning Lease liability 1,216,625 1,151,804 1,266,986 1,106,022 Rent due at end Lease liability Right-of-use asset 1,151,804 1,216,625 1,106,022 Right-of-use asset 1,266,986 a. 1,106,022 b. 1,266,986 1,106,022 1,216,625 1,151,804 C. 1,151,804 d. 1,266,986 1,216,625

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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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.

Question

beginning of each lease year and (2) at the end of each lease
P50,000. How much are the carrying amounts of the (1) right-
2. (Continuationm of Scenario 1) The machine reverts back to April,
Inc. at the end of the lease term. Sunset Co. uses the straight
line method of depreciation. How much are the lease-related
expenses recognized in 20x2, if the rentals are due (1) at the
year?
Rent due at end
Rent due at beginning
Depreciation
135,181
Depreciation
122,891
Interest expense
Interest expense
115,181
106,699
122,891
115,180
126,986
151,804
a.
151,804
122,891
115,180
b.
266,986
135,181
115,181
122,891
с.
d.
106,699
3. (Continuation of Scenario 1) How much are the current and
noncurrent portions of the lease liability on December 31, 20x1
if the rentals are due (1) at the beginning of each lease year and
(2) at the end of each lease year?
Rent due at end
Rent due at beginning
Noncurrent
Current
Noncurrent
Current
1,066,986
84,820
1,066,984
200,000
93,301
93,301
a.
84,820
122,891
1,066,984
973,685
973,685
b.
1,151,804
1,066,984
C.
d.
84,819
1,066,986
84,820
Scenario 2: Residual value guarantee
4. The lease payments are due at the end of each year. Sunset Co.
guarantees that April, Inc. will realize P80,000 from selling the
machine to another party at the end of the lease term. At
contract inception, Sunset Co, estimates that the fair value less
disposal costs of the machine at the end of the lease term
when the machine is reverted back to April, Inc., win
of-use asset and (2) lease liability on December 31, 20x1?
a. 1,116,431; 1,164,527
b. 1,044,431; 1,164,527
c. 1,141,781; 1,080,980
d. 1,121,431; 1,080,980

Fact pattern for the nine (9) independent scenarios below:
PROBLEM 4: MULTIPLE CHOICE-COMPUTATIONAL
On January 1, 20x1, Sunset Co. leased a machine from April, Inc.
Information on the lease is as follows:
Annual rent
P200,000
Lease term
10 years
12 years
Useful life of machine
Implicit interest rate
Lessee's incremental borrowing rate
10%
11%
Scenario 1: Rent due at beg. of year vs. Rent due at end. of year
1. How much are the carrying amounts of the right-of-use asset
and lease liability on December 31, 20x1, if the rentals are due
(1) at the beginning of each lease year and (2) at the end of each
lease year?
Rent due at beginning
Lease liability
Rent due at end
Right-of-use asset
1,266,986
Right-of-use asset
1,151,804
Lease liability
1,106,022
a.
1,216,625
1,266,986
1,151,804
b.
1,216,625
1,106,022
1,266,986
1,106,022
1,151,804
C.
1,266,986
1,106,022
1,216,625
d.
1,216,625
1,151,804
April

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