ear capital lease on a warehouse on December 31, 2021. Lease payments of P520,000, which includes executory cost of P20,000 is due annually, beginning on December 31, 2022, and every December 31 thereafter. The cost of restoring the underlying asset to its original condition as required by the contract was estimated at the present value of P200,000. The interest rate implicit in the lease if 9%. The present value of an ordinary annuity of 1 for nine years at 9% is 5.6.
Neal Company entered into a nine-year capital lease on a warehouse on December 31, 2021. Lease payments of P520,000, which includes executory cost of P20,000 is due annually, beginning on December 31, 2022, and every December 31 thereafter.
The cost of restoring the underlying asset to its original condition as required by the contract was estimated at the present value of P200,000.
The interest rate implicit in the lease if 9%. The present value of an ordinary annuity of 1 for nine years at 9% is 5.6.
Question:
- What amount should be reported as lease liability on December 31, 2021?
A. 2,800,000
B. 2,912,000
C. 4,500,000
D. 4,680,000
- What amount should be recognized initially as cost of the right of use asset?
A. 2,800,000
B. 3,000,000
C. 3,112,000
D. 4,700,000
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