On December 31, 2019, Hina Company signs a 10-year noncancellable lease agreement to lease a storage...
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On December 31, 2019, Hina Company signs a 10-year noncancellable lease agreement to lease a storage building from Jay Company. The following information pertains to this lease agreement: 1. The agreement requires equal rental payments of Php 720,000 beginning December 31, 2019. 2. The fair value of the building on December 31, 2019 is Php 4,400,000. 3. The building has an estimated economic life of 12 years, with an unguaranteed residual value of Php 100,000. Hina Company depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. The interest rate implicit in the lease is 12% per year. 6. The yearly rental payment includes a Php 24,705 of executory costs related to the taxes on the property. Required: All PV factors must be rounded off up to four decimal places but answers must be rounded off to two decimal places including journal entries. 1. How much should be capitalized as the cost of right of use asset? 2. How much should be included in the current liabilities section of Hina Company's Statement of Financial Position at December 31, 2020? 3. How much should be included in the noncurrent liabilities section of Hina Company's statement of financial position at December 31, 2020? 4. How much is the total lease-related expenses to be reported in Hina Company's Income Statement for the year ended December 31, 2020? On December 31, 2019, Hina Company signs a 10-year noncancellable lease agreement to lease a storage building from Jay Company. The following information pertains to this lease agreement: 1. The agreement requires equal rental payments of Php 720,000 beginning December 31, 2019. 2. The fair value of the building on December 31, 2019 is Php 4,400,000. 3. The building has an estimated economic life of 12 years, with an unguaranteed residual value of Php 100,000. Hina Company depreciates similar buildings on the straight-line method. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. 5. The interest rate implicit in the lease is 12% per year. 6. The yearly rental payment includes a Php 24,705 of executory costs related to the taxes on the property. Required: All PV factors must be rounded off up to four decimal places but answers must be rounded off to two decimal places including journal entries. 1. How much should be capitalized as the cost of right of use asset? 2. How much should be included in the current liabilities section of Hina Company's Statement of Financial Position at December 31, 2020? 3. How much should be included in the noncurrent liabilities section of Hina Company's statement of financial position at December 31, 2020? 4. How much is the total lease-related expenses to be reported in Hina Company's Income Statement for the year ended December 31, 2020?
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Solution Calculation of PV of Lease Asset Particulars PV Factor 12 Calculation Amount 00 on ... View the full answer
Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Posted Date:
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