Problem 2 On January 1, 2020, RAGASA Company leased a building with the following information: Annual lease payments Purchase option that is not reasonably certain to be exercised Initial direct cost paid P 2,000,000 600,000 700,000 Lease incentives received 300,000 Lease bonus paid to lessor before commencement of the lease Discounted amount of restoring the building as required by 200,000 400,000 contract 5 years 8 years Lease term Useful life of building Implicit interest rate First lease payment 8% December 31, 2020 a) What amount should be reported as lease liability on December 31, 2020? b) What is the depreciation for the year 2020?

Problem 2 On January 1, 2020, RAGASA Company leased a building with the following information: Annual lease payments Purchase option that is not reasonably certain to be exercised Initial direct cost paid P 2,000,000 600,000 700,000 Lease incentives received 300,000 Lease bonus paid to lessor before commencement of the lease Discounted amount of restoring the building as required by 200,000 400,000 contract 5 years 8 years Lease term Useful life of building Implicit interest rate First lease payment 8% December 31, 2020 a) What amount should be reported as lease liability on December 31, 2020? b) What is the depreciation for the year 2020?

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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t34 Initial direct costs incurred by the lessor in an operating lease should beA. expensed in the year of incurrence by including them in the cost of goods sold or by treating them as a sellingexpense.B. deferred and recognized as reduction in the interest rate implicit in the lease.C. capitalized as part of asset cost and depreciated over the lease term.D. deferred and carried on the statement of financial position until the end of the lease term.
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