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Assignment Ppfrs 16

The document provides instructions and information for 12 accounting problems related to leases. For each problem, it provides key details like lease terms, payment amounts and dates, cost or fair values of assets, implicit interest rates, and other relevant financial information. Readers are asked to use this information to calculate amounts related to lease accounting, such as the lease liability, depreciation expense, cost of a purchased asset, new lease liability amount, gross profit on a sale, unearned interest income, and interest income for the period.

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Joseph Docto
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2K views3 pages

Assignment Ppfrs 16

The document provides instructions and information for 12 accounting problems related to leases. For each problem, it provides key details like lease terms, payment amounts and dates, cost or fair values of assets, implicit interest rates, and other relevant financial information. Readers are asked to use this information to calculate amounts related to lease accounting, such as the lease liability, depreciation expense, cost of a purchased asset, new lease liability amount, gross profit on a sale, unearned interest income, and interest income for the period.

Uploaded by

Joseph Docto
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ASSIGNMENT

PFRS 16
INSTRUCTIONS: Write the correct answers. Show your solution. No solution means no points.

At the beginning of current year, Lessee Company leased a machinery with the following information:

Annual rental payable at the end of each year 1,000,000


Residual value guarantee 500,000
Payment to lessor to obtain a long-term lease 300,000
Cost of dismantling and restoring the asset as required by contract at present value 390,000
Annual executor cost paid by lessee 50,000
Lease term 4 years
Useful life of machinery 8 years
Implicit interest rate 10%
Present value of an ordinary annuity of 1 at 10% for 4 periods 3.17
Present value of 1 at 10% for 4 periods 0.68

1. What is the lease liability at year-end?

2. What is the depreciation for current year?

At the beginning of current year, Nori Mining Company entered into a 5-year lease for drilling equipment. The
entity accounted for the acquisition at the present value of lease payents of P2,400,000 which included a
P100,000 purchase option.

At the end of the lease, the entity is certain to exercise the purchase option.

The entity estimated that the equipment’s fair value will be P200,000 at the end of the 8-year life. The entity
regularly used straight line depreciation on similar equipment.

3. What amount should be recognized as depreciation expense on the right of use asset for the current
year?

At the current year-end, Mercedez Company purchased a machinery that it had been leasing under a finance
arrangement.

The right of use asset and lease liability were originally recorded at P2,000,000.

At the time of the purchase, the accumulated depreciation on the right of use asset was P800,000 and the
remaining balance of the lease liability was P1,300,000.

The underlying asset was purchased for P1,440,000 cash.

4. What amount is debited as cost of the machinery on the date of purchase?

Alyanna Company entered into a lease of building on January 1, 2018 with the following information:

Annual rental payable at the end of each year 500,000


Lease term 5 years
Useful life building 20 years
Implicit interest rate 10%
PV of an ordinary annuity of 1 at 10% for 5 periods 3.79

The lease contained an option for the lessee to extend for a further 5 years.

At the commencement date, the exercise of the extension option is not reasonably certain.

After 3 years on January 1, 2021, the lessee decided to extend the lease for a further 5 years.
New annual rental payable at the end of each year 600,000
New implicit interest rate 8%
PV of an ordinary annuity of 1 at 8% for 5 periods 3.99
PV of 1 at 8% for 2 periods 0.86
PV of an ordinary annuity of 1 at 8% for 2 periods 1.78

5. What is the new lease liability on January 1, 2021?

6. What is the carrying amount of right to use asset on January 1, 2021?

Abe Company, lessor, leased an equipment under an operating lease. The lease term is 5 years and the lease
payments are made in advance on January 1 of each year as shown in the following schedule:

January 1, 2018 1,000,000


January 1, 2019 1,000,000
January 1, 2020 1,400,000
January 1, 2021 1,700,000
January 1, 2022 1,900,000
Total rentals 7,000,000

7. What is the rent income for 2018?

8. On December 31, 2019, what amount should be recognized as accrued rent receivable?

Howe Company leased equipment to Knew Company on January 1, 2018, for an eight-year period expiring
December 31, 2025.

Equal payments under the lease are P500,000 and are due on January 1 of each year. The first payment was
made on January 1, 2018.

The selling price of the equipment is P2,900,000 and the carrying amount is P2,000,000. The lease
appropriately accounted for as a sales type lease.

The present value of the lease payments at an implicit interest rate of 12% is P2,780,000.

9. What amount of gross profit on sale should be reported for 2018?

Vanderbilt Company is a dealer in machinery. On January 1, 2018, a machinery was leased to another entity
with the following provisions:

Annual rental payable at the end of each year 3,000,000


Lease term and useful life of machiner 5 years
Cost of machinery 8,000,000
Residual value-unguaranteed 1,000,000
Implicit interest rate 12%
PV of an ordinary annuity of 1 for 5 periods at 12% 3.60
PV of 1 for 5 periods at 12% 0.57

At the end of lease term on December 31, 2022, the machinery will revert to Vanderbilt.

Vanderbilt incurred initial direct cost of P300,000 in finalizing the lease agreement.

10. What amount should be reported as gross profit on sale in 2018?

Camia Company is in the business of leasing new sophisticated equipment. As lessor, the entity expects a 12%
return.

At the end of the lease term, the equipment will revert to Camia Company.
On January 1, 2018 an equipment is leased to another entity under a direct financing lease.

Cost of equipment to Camia 5,500,000


Residual value – unguaranteed 400,000
Annual rental payable in advance 959,500
Useful life and lease term 8 years
Implicit interest rate 12%
First lease payment January 1, 2018

11. What is the unearned interest income on January 1, 2018?

12. What is the interest income for 2018?

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