Problem 10-32 (IFRS) At the beginning of current year, Southstar Company leased a building with the following information: Annual rental payable at the end of each lease year Initial direct cost paid Lease incentive received Lease bonus paid to lessor before commencement of lease Present value of cost of restoring the building as required by contract discounted at 8% Purchase option that is reasonably certain Lease term Useful life of building Implicit interest rate Present value of an ordinary annuity of 1 at 10% for 6 periods Present value of 1 at 10% for 6 periods a. 8,750,000 b. 8,700,000 c. 9,900,000 d. 7,755,000 1. What amount should be recorded initially as cost of right of use asset? a. 1,450,000 b. 1,550,000 870,000 875,000 C. d. 1,500,000 405,000 50,000 300,000 2. What amount should be recorded as annual depreciation of the right of the asset? 945,000 1,000,000 6 years 10 years 10% a. 785,600 b. 710,000 c. 804.500 d. 729,600. 4.36 0.56 3. What total amount should be reported as interest expense for the current year? a. 6,310,000 b. 7,100,000 c. 9,060,000 d. 5,600,000 . What amount should be reported as lease liability at year-end
Problem 10-32 (IFRS) At the beginning of current year, Southstar Company leased a building with the following information: Annual rental payable at the end of each lease year Initial direct cost paid Lease incentive received Lease bonus paid to lessor before commencement of lease Present value of cost of restoring the building as required by contract discounted at 8% Purchase option that is reasonably certain Lease term Useful life of building Implicit interest rate Present value of an ordinary annuity of 1 at 10% for 6 periods Present value of 1 at 10% for 6 periods a. 8,750,000 b. 8,700,000 c. 9,900,000 d. 7,755,000 1. What amount should be recorded initially as cost of right of use asset? a. 1,450,000 b. 1,550,000 870,000 875,000 C. d. 1,500,000 405,000 50,000 300,000 2. What amount should be recorded as annual depreciation of the right of the asset? 945,000 1,000,000 6 years 10 years 10% a. 785,600 b. 710,000 c. 804.500 d. 729,600. 4.36 0.56 3. What total amount should be reported as interest expense for the current year? a. 6,310,000 b. 7,100,000 c. 9,060,000 d. 5,600,000 . What amount should be reported as lease liability at year-end
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:mpany purchaseda
Problem 10-32 (IFRS)
under a
finance
At the beginning of current year, Southstar Company leased
a building with the following information:
ity were originally
Annual rental payable at the end of each lease year
Initial direct cost paid
Lease incentive received
Lease bonus paid to lessor before commencement of lease
Present value of cost of restoring the building
as required by contract discounted at 8%
Purchase option that is reasonably certain
Lease term
Useful life of building
Implicit inierest rate
Present value of an ordinary annuity of 1 at 10% for 6 periods
Present value of 1 at 10% for 6 periods
1,500,000
405,000
50,000
300,000
lated depreciation
and the remaining
0,000.
-P1,500,000 cash.
945,000
1,000,000
6 years
10 years
10%
4.36
0.56
of the machinery
1. What amount should be recorded initially as cost of right
of use asset?
a. 8,750,000
b. 8,700,000
c. 9,900,000
d. 7,755,000
2. What amount should be recorded as annual depreciation
of the right of the asset?
sed an equipment
recorded the asset
otion of P100,000.
a. 1,450,000
b. 1,550,000
870,000
d.
easonably certain
C.
875,000
and a fair value
3. What total amount should be reported as interest
expense for the current year?
a. 785,600
b. 710,000
C. 804.500
d. 729,600
cise the purchase
ld be recognized
ing the purchase
4. What amount should be reported as lease liability at
year-end
a. 6,310,000
b. 7,100,000
c. 9,060,000
d. 5,600,000
365
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