*see attachedDetermine the (a) initial lease liability and (b) initial cost of the right-of-use asset, if the first lease payment was made at the start of the lease and at the beginning of each year for the next four years and there was no transfer of title nor purchase optiona. (a) P 4,126,000 and (b) P 4,726,000b. (a) P 4,726,000 and (b) P 4,126,000c. (a) P 4,310,000 and (b) P 4,910,000d. (a) P 4,910,000 and (b) P 4,310,000 White Company leased a building on Jan. 1 with the following informationP 1,000,000Fixed annual payment at the end of each yearInitial direct costs paid350,000150,000Lease bonus paid before commencement of leaseLease incentives received100,000Discounted amount of restoring the building asrequired by the contract200,000Lease term5 yearsUseful life of building8 yearsImplicit interest rate8%Incremental borrowing rate10%PV of an ordinary annuity of 1 for 5 periods at8%3.9910%3.79PV of an annuity due of 1 for 5 periods at8%4.3110%4.17PV of 1 for 5 periods at8%0.6810%0.62The expected fair value at the end of the building's useful life is P 400,000. The straight-line depreciation is used

Lease liability is initially determined at the present value of lease payments not paid at the…

Answered: White Company leased a building on Jan.…

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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Determine the (a) initial lease liability and (b) initial cost of the right-of-use asset, if the first lease payment was made at the start of the lease and at the beginning of each year for the next four years and there was no transfer of title nor purchase option
a. (a) P 4,126,000 and (b) P 4,726,000
b. (a) P 4,726,000 and (b) P 4,126,000
c. (a) P 4,310,000 and (b) P 4,910,000
d. (a) P 4,910,000 and (b) P 4,310,000

White Company leased a building on Jan. 1 with the following information
P 1,000,000
Fixed annual payment at the end of each year
Initial direct costs paid
350,000
150,000
Lease bonus paid before commencement of lease
Lease incentives received
100,000
Discounted amount of restoring the building as
required by the contract
200,000
Lease term
5 years
Useful life of building
8 years
Implicit interest rate
8%
Incremental borrowing rate
10%
PV of an ordinary annuity of 1 for 5 periods at
8%
3.99
10%
3.79
PV of an annuity due of 1 for 5 periods at
8%
4.31
10%
4.17
PV of 1 for 5 periods at
8%
0.68
10%
0.62
The expected fair value at the end of the building's useful life is P 400,000. The straight-line depreciation is used

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