Tris leased a facility from Divergent Company in January 1, 2016. Terms of the lease were as
Question:
Tris leased a facility from Divergent Company in January 1, 2016. Terms of the lease were as follows:
Annual rental P240,000
Annual real property tax assumed by Tris 60,000
Security deposit 300,000
Lease term 12 years
Divergent agreed to pay entire amount of the fees above including the annual rental for 2017. In addition to annual rental and real property taxes, part of the lease agreement was for Tris to improve the facility. The improvement was completed on January 1, 2018. Details of the Improvements were as follows:
Cost of leasehold improvement P3,000,000
Estimated useful life of improvement 15 years
REQUIRED:
Determine the following:
1. The income to be reported by Divergent in 2016
2. The income to be reported by Divergent in 2017
3. The income to be reported by Divergent in 2018 assuming the company opted to report income from improvement using the lump-sum method.
Business Law Text and Cases
ISBN: 978-1285185248
13th edition
Authors: Kenneth Clarkson, Roger LeRoy Miller, Frank Cross