On January 1, 2022, ABC Company and the lessor agreed to amend the original terms of the lease by reducing the lease payments to P50,000 andincreasing the implicit interest rate to 9% for the 3 remaining years.The lease liability has a carrying amount of P200,000 on January 1, 2022.What is the decrease or increase in lease liability for 2022? (indicate if decrease or increase)

Lease refers to a contract between two parties under which one party who is the real owner of an…

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What is the decrease or increase in lease liability for 2022? (indicate if decrease or increase)

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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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

On January 1, 2022, ABC Company and the lessor agreed to amend the original terms of the lease by reducing the lease payments to P50,000 and
increasing the implicit interest rate to 9% for the 3 remaining years.
The lease liability has a carrying amount of P200,000 on January 1, 2022.
What is the decrease or increase in lease liability for 2022? (indicate if decrease or increase)

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