An asset with a market value of P1,000,000 is leased on January 1, 2019. Five annual lease payments are due each December 31 beginning December 31, 2019. The guaranteed residual value on December 31, 2023, the last day of the lease term, is P400,000. The lessor’s implicit interest rate is 8%. What is the annual lease payment? A. P200,000 B. P182,456 C. P168,910 D. P120,000

An asset with a market value of P1,000,000 is leased on January 1, 2019. Five annual lease payments are due each December 31 beginning December 31, 2019. The guaranteed residual value on December 31, 2023, the last day of the lease term, is P400,000. The lessor’s implicit interest rate is 8%. What is the annual lease payment? A. P200,000 B. P182,456 C. P168,910 D. P120,000

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter7: Financial Activities

Section: Chapter Questions

Problem 1AIC

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An asset with a market value of P1,000,000 is leased on January 1, 2019. Five annual lease payments are due each December 31 beginning December 31, 2019. The guaranteed residual value on December 31, 2023, the last day of the lease term, is P400,000. The lessor's implicit interest rate is 8%. What is the annual lease payment? A. P200,000 B. P182,456 C. P168,910 D. P120,000
An asset with a market value of P1,000,000 is leased on January 1, 2019. Five annual lease payments are due each December 31 beginning December 31, 2019. The guaranteed residual value on December 31, 2023, the last day of the lease term, is P400,000. The lessor’s implicit interest rate is 8%. What is the annual lease payment? A.P200,000 B.P182,456 C.P168,910 D.P120,000
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Fact pattern On January 1, 2019, Lessee enters into a 4-year lease of an asset for an annual rent of P10,000 payable at the beginning of each year. The interest rate implicit in the lease is 10% while the lessee's incremental borrowing rate is 12%. 9. The initial measurement of the right-of-use asset is determined as follows: P10,000 x PV of an ordinary annuity of P1 @10%, n=4. 10. The initial measurement of the lease liability is determined as follows: P10,000 x PV of an annuity due of P1 @10%, n=4.
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WITH SOLUTION/COMPUTATION 58. On January 1, 2019, Day Corp. entered into a 10-year lease agreement with Ward, Inc. for industrial equipment. Annual lease payments of P10,000 are payable at the end of each year. Day knows that the lessor expects a 10% return on the lease. Day has a 12% incremental borrowing rate. The equipment is expected to have an estimated useful life of 10 years. In addition, a third party, unrelated to Day, has guaranteed to pay Ward a residual value of P5,000 at the end of the lease. In Day’s January 1, 2019 balance sheet, the principal amount of the lease obligations wasa. 63,374 b. 61,446 c. 58,112 d. 56,502
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