(SOLVED) Annual rental for the first two years payable at the end of each year Php 200,000.00 Annual rental for the next three years payable at the end of each year Php 300,000.00

Question

PROBLEM 1

On January 1, 2020, David Company entered into a 5-year lease floor of a building with the following terms:

Annual rental for the first two years payable at the end of each year Php 200,000.00

Annual rental for the next three years payable at the end of each year Php 300,000.00

Initial direct costs paid by lessee Php 100,000.00

Leasehold improvement Php 250,000.00

Present value of restoration cost required by contract Php 50,000.00

Useful life of building ---20 years

Implicit interest rate 8%

Discount rate for the restoration costs 5%

PV of an ordinary annuity of 1 at 8% for two periods -1.783

PV of an ordinary annuity of 1 at 8% for three periods ------2.577

PV of 8% for two periods 0.857

a.

Compute the lease liability on January 1, 2020

b.

Compute the cost of right of use asset
c.

How much is the carrying amount of the lease liability on December 31, 2022?

d.

Assuming that the asset will revert to the lessor at the end of the lease term and all improvements were borne by the lessee, compute for the total expenses to be reported in the income statement for the year 2023?

e.

How much will be reported as non-current assets (assuming all data in the previous numbers) in the statement of financial position on December 31, 2021.