On March 1, 2020, Juvius Company entered into a lease contract for newly constructed warehouses and storage facilities. The contract contains the following information:Composite life of warehouses = 10 yearsLease Term = 5 yearsAnnual lease payment at the beginning of each lease year= Php 1,500,000Annual payment for taxes2020: Php 41,666.672021 – 2024: Php 50,000/year2026: Php 8,333.33Annual payment for insurance (good for 12 months, started at commencement date) = 100,000Initial Direct Costs = 200,000Implicit Rate: 8%Note: Executory costs are paid every December 31. Advance payments are treated as prepayments. The asset reverts to the owner at the end of the term.Required: All PV factors must be rounded off up to four decimal places but answers must be rounded off to two decimal places including journal entries. Assume calendar year period.Prepare related journal entries to record the transactions that transpire during the year 2020. Show necessary computations for the right of use asset, lease liability, interest expense and depreciation.How much is the carrying amount of the right of use asset on December 31, 2022?How much is to be reported as expenses related to the lease contract for December 31, 2020?How much is the carrying amount of the lease liability on December 31, 2021? Determine the current and non-current portion? On March 1, 2020, Juvius Company entered into a lease contract for newly constructed warehouses andstorage facilities. The contract contains the following information:Composite life of warehouses = 10 yearsLease Term = 5 yearsAnnual lease payment at the beginning of each lease year = PHP 1,500,000Annual payment for taxeso 2020: Php 41,666.67o 2021 – 2024: Php 50,000/yearo 2026: Php 8,333.33Annual payment for insurance (good for 12 months, started at commencement date) = 100,000Initial Direct Costs = 200,000Implicit Rate: 8%Note: Executory costs are paid every December 31. Advance payments are treated as prepayments. Theasset reverts to the owner at the end of the term.Required: All PV factors must be rounded off up to four decimal places but answers must be rounded offto two decimal places including journal entries. Assume calendar year period.1. Prepare related journal entries to record the transactions that transpire during the year 2020. Shownecessary computations for the right of use asset, lease liability, interest expense and depreciation.2. How much is the carrying amount of the right of use asset on December 31, 2022?3. How much is to be reported as expenses related to the lease contract for December 31, 2020?4. How much is the carrying amount of the lease liability on December 31, 2021? Determine the currentand non-current portion?

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Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 13E: On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million....

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On March 1, 2020, Juvius Company entered into a lease contract for newly constructed warehouses and storage facilities. The contract contains the following information:

Composite life of warehouses = 10 years
Lease Term = 5 years
Annual lease payment at the beginning of each lease year= Php 1,500,000
Annual payment for taxes

2020: Php 41,666.67

2021 – 2024: Php 50,000/year

2026: Php 8,333.33

Annual payment for insurance (good for 12 months, started at commencement date) = 100,000
Initial Direct Costs = 200,000
Implicit Rate: 8%

Note: Executory costs are paid every December 31. Advance payments are treated as prepayments. The asset reverts to the owner at the end of the term.

Required: All PV factors must be rounded off up to four decimal places but answers must be rounded off to two decimal places including journal entries. Assume calendar year period.

Prepare related journal entries to record the transactions that transpire during the year 2020. Show necessary computations for the right of use asset, lease liability, interest expense and depreciation.
How much is the carrying amount of the right of use asset on December 31, 2022?
How much is to be reported as expenses related to the lease contract for December 31, 2020?
How much is the carrying amount of the lease liability on December 31, 2021? Determine the current and non-current portion?

On March 1, 2020, Juvius Company entered into a lease contract for newly constructed warehouses and
storage facilities. The contract contains the following information:
Composite life of warehouses = 10 years
Lease Term = 5 years
Annual lease payment at the beginning of each lease year = PHP 1,500,000
Annual payment for taxes
o 2020: Php 41,666.67
o 2021 – 2024: Php 50,000/year
o 2026: Php 8,333.33
Annual payment for insurance (good for 12 months, started at commencement date) = 100,000
Initial Direct Costs = 200,000
Implicit Rate: 8%
Note: Executory costs are paid every December 31. Advance payments are treated as prepayments. The
asset reverts to the owner at the end of the term.
Required: All PV factors must be rounded off up to four decimal places but answers must be rounded off
to two decimal places including journal entries. Assume calendar year period.
1. Prepare related journal entries to record the transactions that transpire during the year 2020. Show
necessary computations for the right of use asset, lease liability, interest expense and depreciation.
2. How much is the carrying amount of the right of use asset on December 31, 2022?
3. How much is to be reported as expenses related to the lease contract for December 31, 2020?
4. How much is the carrying amount of the lease liability on December 31, 2021? Determine the current
and non-current portion?

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