Question: On January 1, 20x1, Co. X enters into a three (3) year lease of equipment for an annual rent of P100,000 payable at the

On January 1, 20x1, Co. X enters into a three (3) year lease of equipment for an annual rent of P100,000 payable at the end of each year. The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee's incremental borrowing rate is 12%. Co. X uses the straight-line method of depreciation. The relevant present value factors are as follows; PV of ordinary annuity of P1 at 10%, n=3.2.48685 PV of ordinary annuity of P1 at 12%, n=3. 2.40183 How much is the lease liability to be recognized by Co. X on initial recognition?

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