Direction: Explain the following statements/question in not less than 5 sentences. 1. Explain the following: a. Leases b. Insurance contracts Solve the following problem. Show your solutions. 2. On January 1, 20x1, Entity X enters into a 3-year lease of equipment for an annual rent of 100,000 payable at the end of each year. The equipment has a ₱ remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee’s incremental borrowing rate is 12%. Entity X uses the straight- line method of depreciation. The relevant present value factors are as follows: - PV of an ordinary annuity of 1 @10%, n=3............ 2.48685 ₱ - PV of an ordinary annuity of 1 @12%, n=3............ 2.40183 ₱ How much is the lease liability to be recognized by Entity X on initial recognition?
ESSAY:
Direction: Explain the following statements/question in not less than 5 sentences.
1. Explain the following:
a. Leases
b. Insurance contracts
Solve the following problem. Show your solutions.
2. On January 1, 20x1, Entity X enters into a 3-year lease of equipment for an annual rent of 100,000 payable at the end of each year. The equipment has a ₱ remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee’s incremental borrowing rate is 12%. Entity X uses the straight- line method of depreciation. The relevant present value factors are as follows:
- PV of an ordinary annuity of 1 @10%, n=3............ 2.48685 ₱
- PV of an ordinary annuity of 1 @12%, n=3............ 2.40183 ₱
How much is the lease liability to be recognized by Entity X on initial recognition?
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