At the beginning of the current year, Ashe Company entered into a ten-year noncancelable lease requiring year-end payments of P1,000,000. Ashe’s incremental borrowing rate is 12%, while the lessor’s implicit interest rate, known to Ashe, is 10%. Present value factors for an ordinary annuity for ten periods are 6.145 at 10% and 5.650 at 12%. On the same date, Ashe Company paid the initial direct cost of P200,000 to negotiate and secure the leasing agreement. Ownership of the property remains to the lessor at the expiration of the lease. The leased property has an estimated economic life of 12 years. 1. What amount should be capitalized as cost of the Right to Use Asset? a. 6,145,000 b. 6,345,000 c. 5,650,000 d. 5,850,000 2. What is the depreciation for the current year? a. 614,500 b. 634,500 c. 528,750 d. 565,000 3. What is the lease liability at the end of the current year? a. 5,328,000 b. 5,552,000 c. 5,759,500 d. 5,979,500

On January 1, Lessee Company leases equipment with a useful life of 5 years for a 6-year lease term. Payments of $88,000 are due at the beginning of each year. The incremental borrowing rate is 4%. The present value of the payments is $407,440. Which of the following is true? Interest expense at the end of the first year is $407,440 x .04 Amortization expense at the end of the first year is $407,440 divided by 6. Lease expense at the end of the first year is $88,000. Interest expense at the end of the first year is $319,440 x .04

Lessee enters into a 10-year lease of property with annual lease payments of P50,000, payable at the beginning of each year. The contract specifies that lease payments will increase every two years on the basis of the increase in the Consumer Price Index for the preceding 24 months. The Consumer Price Index at the commencement date is 125. The rate implicit in the lease is not readily determinable. Lessee’s incremental borrowing rate is 5 per cent per annum, which reflects the fixed rate at which Lessee could borrow an amount similar to the value of the right-of-use asset, in the same currency, for a 10-year term, and with similar collateral. Discount factor for 5% for 9 periods is 7.10782.Lessee expects to consume the right-of-use asset’s future economic benefits evenly over the lease term and, thus, depreciates the right-of-use asset on a straight-line basis.At the beginning of the third year of the lease the Consumer Price Index is 135.Determine the amount of lease liability…

Cullumber Company signed a lease for an office building for a period of 9 years. Under the lease agreement, a security deposit of $7,200 is made. The deposit will be returned at the expiration of the lease with interest compounded at 6% per year. Click here to view the factor table. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) What amount will Cullumber receive at the time the lease expires? (Round answer to 2 decimal places, e.g. 25.25.) Amount at the time the lease expires