On March 31, 20x1, TRUST CO. (customer)enters into a 4 -year lease of equipment with FAITH CO. ( Supplier). The annual rent is P220,000, payable at the end of each year . The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee's incremental borrowing rate is 12%. The relevant value factors are as follows: PV of an ordinary annuity of P1@10%, n=4 ...... 3.16987 PV of an ordinary annuity of P1@12%, n=4 ....... 3.03735 1.How much is the lease liability to be recognized by TRUST CO. on initial recognition? 2.Assume that the lease in No. 2 is a A)finance lease. How much is the net investment in the lease to be recognized by FAITH CO. on initial recognition? B) Assume that the lease is an operating lease . How much is the lease ( rent) income in 20x2?
On March 31, 20x1, TRUST CO. (customer)enters into a 4 -year lease of equipment with FAITH CO. ( Supplier). The annual rent is P220,000, payable at the end of each year . The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee's incremental borrowing rate is 12%. The relevant value factors are as follows: PV of an ordinary annuity of P1@10%, n=4 ...... 3.16987 PV of an ordinary annuity of P1@12%, n=4 ....... 3.03735 1.How much is the lease liability to be recognized by TRUST CO. on initial recognition? 2.Assume that the lease in No. 2 is a A)finance lease. How much is the net investment in the lease to be recognized by FAITH CO. on initial recognition? B) Assume that the lease is an operating lease . How much is the lease ( rent) income in 20x2?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On March 31, 20x1, TRUST CO. (customer)enters into a 4 -year lease of equipment with FAITH CO. ( Supplier). The annual rent is P220,000, payable at the end of each year . The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee's incremental borrowing rate is 12%. The relevant value factors are as follows: PV of an ordinary annuity of P1@10%, n=4 ...... 3.16987 PV of an ordinary annuity of P1@12%, n=4 ....... 3.03735
1.How much is the lease liability to be recognized by TRUST CO. on initial recognition?
2.Assume that the lease in No. 2 is a A)finance lease. How much is the net investment in the lease to be recognized by FAITH CO. on initial recognition? B) Assume that the lease is an operating lease . How much is the lease ( rent) income in 20x2?
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