XI. Direct Finance Lease – Lessee (PFRS 16) Problem 13. SMC Inc. leased a machine on January 1,2011 to SM Inc. with the following pertinent information: Annual rental payable at the beginning of each year P500,000 Lease term 5 years Useful life of machine 6 years Fair value of machine on January 1,2011 2,400,000 Incremental borrowing rate of lessee 14% Implicit interest rate of lessor known to lessee 12% Bargain purchase option at the end of lease term 100,000 Residual value of the machine 200,000 Initial direct cost incurred by lessee 300,000 Prepaid bonus paid by lessee 400,000 Estimated restoration cost in which lessee has contractual obligation 1,000,000 Required: Based on your audit, determine the following: ____________1. Initial amount recognized as right of use asset ____________2. Initial amount recognized as leased liability ____________3. Depreciation Expense in 2011 assuming cost model ____________4. Book value of right of use asset on December 31, 2012 ____________5. Current Lease Liability on December 31,2011 ____________6. Noncurrent Lease Liability on December 31,2012 ____________7. Interest expense in 2011 ____________8. Interest expense in 2012
XI. Direct Finance Lease – Lessee (PFRS 16)
Problem 13. SMC Inc. leased a machine on January 1,2011 to SM Inc. with the following pertinent
information:
Annual rental payable at the beginning of each year P500,000
Lease term 5 years
Useful life of machine 6 years
Fair value of machine on January 1,2011 2,400,000
Incremental borrowing rate of lessee 14%
Implicit interest rate of lessor known to lessee 12%
Bargain purchase option at the end of lease term 100,000
Residual value of the machine 200,000
Initial direct cost incurred by lessee 300,000
Prepaid bonus paid by lessee 400,000
Estimated restoration cost in which lessee has contractual obligation 1,000,000
Required: Based on your audit, determine the following:
____________1. Initial amount recognized as right of use asset
____________2. Initial amount recognized as leased liability
____________3.
____________4. Book value of right of use asset on December 31, 2012
____________5. Current Lease Liability on December 31,2011
____________6. Noncurrent Lease Liability on December 31,2012
____________7. Interest expense in 2011
____________8. Interest expense in 2012
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