to use specialized equipment for 4 years. The equipment had a useful life of 5 years. The following terms were agreed on January 1, 2020: • P250,000 annual rental, the first payment will be on on December 31, 2020 followed by subsequent payments every December 31 hereafter, for a total of 4 payments. • Implicit rate of the lease was 8%, while the incremental borrowing rate of Baal was 10%. • The lease agreement provides for a purchase option of P100,000, at the end of the lease term. Baal will exercise the option with reasonable certainty. The option was exercised by Baal Co. at the end of the lease term. (round off PV factors to 4 decimal places) Unit 4 Exercise Worksheet 2 Requirements: (round off any peso value to the nearest one peso to eliminate centavos, if any) a. What amount of lease liability will be recorded by Baal on January 1, 2020? (Round off present value factors to four decimal places, round off all peso values to the nearest o
On January 1, 2020, Baal Co. (lessee) entered into a contract of lease with Raiden Shogun Co. (lessor)
that allows Baal to use specialized equipment for 4 years. The equipment had a useful life of 5 years.
The following terms were agreed on January 1, 2020:
• P250,000 annual rental, the first payment will be on on December 31, 2020 followed by
subsequent payments every December 31 hereafter, for a total of 4 payments.
• Implicit rate of the lease was 8%, while the incremental borrowing rate of Baal was 10%.
• The lease agreement provides for a purchase option of P100,000, at the end of the lease term.
Baal will exercise the option with reasonable certainty.
The option was exercised by Baal Co. at the end of the lease term.
(round off PV factors to 4 decimal places)
Unit 4 Exercise Worksheet
2
Requirements: (round off any peso value to the nearest one peso to eliminate centavos, if any)
a. What amount of lease liability will be recorded by Baal on January 1, 2020? (Round off present
value factors to four decimal places, round off all peso values to the nearest one peso.)
b. What amount of right of use asset will be recorded by Baal on January 1, 2020?
c. What will be recorded by Baal as
d. What is the carrying amount of the right-of-use asset on December 31, 2021?
e. Prepare an amortization table for the lease liability.
f. Prepare the
g. Prepare the journal entries in the books of Baal for the year 2023.
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