Problem 2 On January 1, 2022, Miller Textiles leased a cutting machine from Good Machinery. The lease is for five years with bargain purchase option of P100,000. It is reasonably certain that Miller will exercise the option at the end of the lease period. The machine has an estimated useful life of 8 years with zero residual value. The lease calls for Miller to make annual payments of P250,000 due at the beginning of each year. Miller uses the straight-line method of depreciation and pays 10% interest on borrowed money. The lease contract also requires Miller to make additional variable lease payments based on the increase in consumer price index (CPI) at the start of each year compared to the CPI on January 1, 2021. The CPI is 110 on January, 2022, and 120 on January 1, 2023. 26. What is the balance of lease liability after remeasurement and payment on January 1, 2023?
Problem 2 On January 1, 2022, Miller Textiles leased a cutting machine from Good Machinery. The lease is for five years with bargain purchase option of P100,000. It is reasonably certain that Miller will exercise the option at the end of the lease period. The machine has an estimated useful life of 8 years with zero residual value. The lease calls for Miller to make annual payments of P250,000 due at the beginning of each year. Miller uses the straight-line method of depreciation and pays 10% interest on borrowed money. The lease contract also requires Miller to make additional variable lease payments based on the increase in consumer price index (CPI) at the start of each year compared to the CPI on January 1, 2021. The CPI is 110 on January, 2022, and 120 on January 1, 2023. 26. What is the balance of lease liability after remeasurement and payment on January 1, 2023?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 2
On January 1, 2022, Miller Textiles leased a cutting machine from Good Machinery.
The lease is for five years with bargain purchase option of P100,000. It is reasonably
certain that Miller will exercise the option at the end of the lease period. The machine
has an estimated useful life of 8 years with zero residual value. The lease calls for
Miller to make annual payments of P250,000 due at the beginning of each year. Miller
uses the straight-line method of depreciation and pays 10% interest on borrowed
money.
The lease contract also requires Miller to make additional variable lease payments
based on the increase in consumer price index (CPI) at the start of each year
compared to the CPI on January 1, 2021. The CPI is 110 on January, 2022, and 120
on January 1, 2023.
26. What is the balance of lease liability after remeasurement and payment on
January 1, 2023?
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