On July 1, 2021, Aurora Company leased a equipment from Lucena Company. The lease was oncancellable and was in substance an installment purchase. Two(2) possible options are summarized pelow: Description Option 1 Option 2 July 1, 2021 P200,000 P20,000 (July 1, 2021) P20,000 (July 1, 2030) July 1, 2021 P200,000 P20,000 (July 1, 2022) P20,000(July 1, 2031) Date of contract Total contract price 1st payment (amount & date) Last payment (amount & date) All payments are of equal amounts. The prevailing interest rate for Aurora on similar financing agreement is 10%. Title will pass to Aurora when the final contract price is paid. The equipment has an estimated useful life of 10 years with no anticipated salvage value. REQUIRED: Compute for the following: 21. Cost of the asset called Right of Use Asset (option 1) 22. Cost of the asset called Right of Use Asset (option 2) 23. Depreciation expense for the 6-month period ended Dec. 31, 2021 under Option 2. 24. Interest expense for the 6-month period ended Dec. 31, 2021under Option 2. 25. Interest expense for the year ended Dec. 31, 2022 under option 1. Round computations to the nearest peso. Final answers shall be presented in the answer sheet. Erasures and alterations will not be allowed again in the answer sheet. Supporting computations shall be submitted to get credit.
On July 1, 2021, Aurora Company leased a equipment from Lucena Company. The lease was oncancellable and was in substance an installment purchase. Two(2) possible options are summarized pelow: Description Option 1 Option 2 July 1, 2021 P200,000 P20,000 (July 1, 2021) P20,000 (July 1, 2030) July 1, 2021 P200,000 P20,000 (July 1, 2022) P20,000(July 1, 2031) Date of contract Total contract price 1st payment (amount & date) Last payment (amount & date) All payments are of equal amounts. The prevailing interest rate for Aurora on similar financing agreement is 10%. Title will pass to Aurora when the final contract price is paid. The equipment has an estimated useful life of 10 years with no anticipated salvage value. REQUIRED: Compute for the following: 21. Cost of the asset called Right of Use Asset (option 1) 22. Cost of the asset called Right of Use Asset (option 2) 23. Depreciation expense for the 6-month period ended Dec. 31, 2021 under Option 2. 24. Interest expense for the 6-month period ended Dec. 31, 2021under Option 2. 25. Interest expense for the year ended Dec. 31, 2022 under option 1. Round computations to the nearest peso. Final answers shall be presented in the answer sheet. Erasures and alterations will not be allowed again in the answer sheet. Supporting computations shall be submitted to get credit.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please help me to answer all of the required with computation Number 21 to 25. thank you
Transcribed Image Text:II
On July 1, 2021, Aurora Company leased a equipment from Lucena Company. The lease was
noncancellable and was in substance an installment purchase. Two(2) possible options are summarized
below:
Description
Option 1
Option 2
July 1, 2021
P200,000
P20,000 (July 1, 2021)
P20,000 (July 1, 2030)
July 1, 2021
P200,000
P20,000 (July 1, 2022)
P20,000(July 1, 2031)
Date of contract
Total contract price
1 payment (amount & date)
Last payment (amount & date)
All payments are of equal amounts.
The prevailing interest rate for Aurora on similar financing agreement is 10%. Title will pass to
Aurora when the final contract price is paid. The equipment has an estimated useful life of 10 years with
no anticipated salvage value.
REQUIRED: Compute for the following:
21. Cost of the asset called Right of Use Asset (option 1)
22. Cost of the asset called Right of Use Asset (option 2)
23. Depreciation expense for the 6-month period ended Dec. 31, 2021 under Option 2.
24. Interest expense for the 6-month period ended Dec. 31, 2021under Option 2.
25. Interest expense for the year ended Dec. 31, 2022 under option 1.
Round computations to the nearest peso. Final answers shall be presented in the answer sheet.
Erasures and alterations will not be allowed again in the answer sheet. Supporting computations shall be
submitted to get credit.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education