On January 1, 2019, Obliviate Company entered into a contract to lease a building in BGC. The
Question:
On January 1, 2019, Obliviate Company entered into a contract to lease a building in BGC. The agreements between Warrior Company and lessor are as follows: Annual lease payment, payable in advance, beginning January 1, 2019, is worth P500,000. The lessee incurred initial direct cost worth P40,000 (excluding P10,000 which was reimbursed by the lessor to the lessee).
Lease Term = 10 years
Useful life of Building = 12 years
Implicit interest rate = 12%
Guaranteed Residual Value = P50,000
Purchase Option = P120,000
The lease contains neither a transfer of title to the lessee nor a purchase option. Use at least 4 decimal places to get the PV factor to be used.
Required:
Prepare table of amortization of the lease liability and interest expense for the first 3.
Intermediate Accounting
ISBN: 978-0324659139
11th edition
Authors: Loren A. Nikolai, John D. Bazley, Jefferson P. Jones