IFRS 16 PROBLEM FIRST PROBLEM The company entered into a four year lease contract covering a vehicle annual lease payments of 1 2 million or do at the beginning of each year starting on January 1, 2023 In addition, a residual value guarantee of 1 million was made even though the expected value of the vehicle at the end of the lease term is P700,000 incremental borrowing rate at this date is 9 On January 1, 2024, The expected value was reassessed due to drastic changes in the economy Incremental borrowing rate as of that date was 11 Required Under each of the following independent scenarios, determine the procedures to account for the reassessment Expected value increased to P1,100,000 Expected value decrease to P200,000 SECOND PROBLEM On January 1, 2023, the company entered into a six year lease contract covering an office space Annual lease payments of P2,100,000 are due at the beginning of each year These lease payments will be adjusted starting January 1, 2026 using the change in consumer price index (CPI) from January 1, 2023 to January 1, 2025 The incremental borrowing rate as of this date was 6 CPIs as of January 1, 2023, and 2025 were 120 and 150, respectively The incremental borrowing rate as of January 1, 2025 was 8 Requirement Prepare the amortization schedule and the journal entries on January 1, 2026

The Answer is in the image, click to view ...

Question: IFRS 16 PROBLEM FIRST PROBLEM The company entered into a four-year lease contract covering a vehicle. annual lease payments of 1.2 million or do at

IFRS 16 PROBLEM

FIRST PROBLEM

The company entered into a four-year lease contract covering a vehicle. annual lease payments of 1.2 million or do at the beginning of each year starting on January 1, 2023. In addition, a residual value guarantee of 1 million was made even though the expected value of the vehicle at the end of the lease term is P700,000. incremental borrowing rate at this date is 9%.

On January 1, 2024, The expected value was reassessed due to drastic changes in the economy. Incremental borrowing rate as of that date was 11%.

Required: Under each of the following independent scenarios, determine the procedures to account for the reassessment:

Expected value increased to P1,100,000
Expected value decrease to P200,000

SECOND PROBLEM

On January 1, 2023, the company entered into a six-year lease contract covering an office space. Annual lease payments of P2,100,000 are due at the beginning of each year. These lease payments will be adjusted starting January 1, 2026 using the change in consumer price index (CPI) from January 1, 2023 to January 1, 2025. The incremental borrowing rate as of this date was 6%. CPIs as of January 1, 2023, and 2025 were 120 and 150, respectively. The incremental borrowing rate as of January 1, 2025 was 8%.

Requirement: Prepare the amortization schedule and the journal entries on January 1, 2026.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

FIRST PROBLEM: On January 1, 2023, CLEMENTE Company entered into a five-year lease contract covering an office space. Annual lease payments of P900,000 are due every January 1 of each year. The lease...

IFRS 16 PROBLEMS FIRST PROBLEM Vidal Company entered into a lease contract on January 1, 2023 with the following terms: Annual lease payments payable in advance: P1,000,000 Purchase option price:...

Which one is correct? A or B because the 2 solutions seem to have different computation orientation. A. B. The Decision to Lease or Buy at Wart Computers Warf Computers has decided to proceed with...

1. On Jan 1, 2011 XYZ Co purchased 12,000 shares of ABC Co for $15 a share. ABC has 100,000 shares outstanding. ABC reported net income of $60,000 and paid dividends of $5,000. On Dec 31, 2011 ABC...

EX 3 1. If a lease contains a residual value guarantee, the lessee must: A. add the guaranteed amount to the present value of the minimum lease payments. B. add the present value of the guaranteed...

Warf Computers has decided to proceed with the manufacture and distribution of the virtual keyboard (VK) the company has developed. To undertake this venture, the company needs to obtain equipment...

ACC 4013Spring 2007 Part III Accounts ReceivableAllowance for Doubtful Accounts Another area you have been assigned on the audit is Accounts Receivablemore specifically the Allowance for Doubtful...

Argonaut has to account for the acquisition of 100% of the shares of Moe's Lawn Care Limited (MLC) in Argonaut's June 30, 20X9, financial statements, even though MLC's numbers might be subject to...

Multiple Choice - Problem 4-1: Accounting period 1. A corporation reporting on a fiscal year ending every March 31 shall file its 2021income tax return not later than a. April 15, 2021. c. July 15,...

Let F: R3 R and f, g, h: R2 R be C2 functions. If w = F(x, y, z), where x = f(p, q), y = g(p, q), and z = h(p, q), find formulas for Wp, Wq, and wpp.

What is the need for third law of thermodynamics?

At a rate of 6 . 5 % , what is the future value of $ 1 0 0 that will be paid out in 5 years?FIN 2 6 0 _ Blank.xIsxa ) $ 1 2 5 b ) $ 1 2 0 c ) $ 1 3 0 d ) $ 1 3 5 e ) $ 1 3 7

Project failure can usually be attributed to: Failure to Plan Failure to Execute Failure to Launch Failure to Close

3.17 A department store manager has monitored the number of complaints received per week about poor service. The probabilities for numbers of complaints in a week, established by this review, are...

3.16 If two events are mutually exclusive, we know that the probability of their union is the sum of their individual probabilities. However, this is not the case for events that are not mutually...

3.14 On a sample of 1,500 people in Sydney, Australia, 89 have no credit cards (event A), 750 have one (event B), 450 have two (event C) and the rest have more than two (event D). On the basis of the...