Neal Company entered into a nine-year lease on a warehouse on Dec. 31, 2019. Lease payments of 520,000 which included executory cost of 20,000 is due annually, beginning on Dec. 31, 2020 and every Dec. 31 thereafter. The cost of restoring the underlying asset to its original condition as required by the contract is estimated at the present value of 200,000.
Neal Company entered into a nine-year lease on a warehouse on Dec. 31, 2019. Lease payments of 520,000 which included executory cost of 20,000 is due annually, beginning on Dec. 31, 2020 and every Dec. 31 thereafter. The cost of restoring the underlying asset to its original condition as required by the contract is estimated at the present value of 200,000.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
Related questions
Question
Neal Company entered into a nine-year lease on a warehouse on Dec. 31, 2019.
Lease payments of 520,000 which included executory cost of 20,000 is due annually, beginning on Dec. 31, 2020 and every Dec. 31 thereafter.
The cost of restoring the underlying asset to its original condition as required by the contract is estimated at the present value of 200,000.
The interest rate implicit in the lease is 9%. The PV of an ordinary annuity of 1 for nine years at 9% is 5.60.
1. What amount should be reported as lease liability on December 31,2020?
a. ₱ 4,500,000
b. ₱ 2,912,000
c. ₱ 4,680,000
d. ₱ 2,800,000
2. What is the initial recognition of the right of use asset?
a. ₱ 3,112,000
b. ₱ 2,800,000
c. ₱ 3,000,000
d. ₱ 4,700,000
3. What is the carrying value of the right of use asset on December 31, 2021?
a. ₱ 2,520,000
b. ₱ 2,488,889
c. ₱ 2,750,000
d. ₱ 2,666,667
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning