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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PROBLEM 10: LEASE MODIFICATION WITH EXTENSION of lease term Laze Company entered into a lease agreement for a stall space for its products on January 1, 2020. Some of the agreement in the lease contract are as follows: Annual rental payable at end of each year starting December 31, 2020 P350,000 Lease term 6 years Implicit interest rate in the lease 10% Laze Company proposed an amendment on the original lease contract on January 1, 2023, and was approved by the lessor. The amendment is to extend the lease term for another 2 years with the following additional features: Annual rental payable at end of each year starting December 31, 2023 P350,000 Implicit interest rate in the lease 11% REQUIRED:: Prepare table of amortization and journal entries for the entire lease term.
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Answer is $1,818 Please explain the reasoning and calculations
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Problem 1 Whistler Inc. signed a 6 year non-cancelable lease at the beginning of the year. The leased equipment has a 9 year economic life. The fair value of the leased equipment is $29,000. Annual lease payments due at the beginning of each year are $5,200. There is no bargain purchase option, and the leased asset reverts to the lessor at the end of the lease term. The implicit rate of interest on the lease (known by the lessee) is 6%. Collection of all lease payments is reasonably assured. Part A. What is the classification of this lease from the perspective of the lessee? Part B. What is the classification of this lease from the perspective of the lessor?
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