Lessee Company leased a machine on January 1, 2019 with the following pertinent information: Implicit interest rate - 10% Incremental interest rate - 12% Useful life of the machine - 12 years Lease term - 10 years Fixed rental payment at the end of each year - 900,000 The Lessee Company has the option to purchase the machine upon the lease expiration on January 1, 2029 by paying P400,000. The lessee is reasonably certain to exercise the purchase option at the commencement date of the lease. The estimated residual value of the machine at the end of the 12-year life is P500,000. The carrying value of the right-of-use asset at the end of 2019 is?
Lessee Company leased a machine on January 1, 2019 with the following pertinent information: Implicit interest rate - 10% Incremental interest rate - 12% Useful life of the machine - 12 years Lease term - 10 years Fixed rental payment at the end of each year - 900,000 The Lessee Company has the option to purchase the machine upon the lease expiration on January 1, 2029 by paying P400,000. The lessee is reasonably certain to exercise the purchase option at the commencement date of the lease. The estimated residual value of the machine at the end of the 12-year life is P500,000. The carrying value of the right-of-use asset at the end of 2019 is?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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6. Lessee Company leased a machine on January 1, 2019 with the following pertinent information:
Implicit interest rate - 10%
Incremental interest rate - 12%
Useful life of the machine - 12 years
Lease term - 10 years
Fixed rental payment at the end of each year - 900,000
The Lessee Company has the option to purchase the machine upon the lease expiration on January 1, 2029 by paying P400,000. The lessee is reasonably certain to exercise the purchase option at the commencement date of the lease. The estimated residual value of the machine at the end of the 12-year life is P500,000. The carrying value of the right-of-use asset at the end of 2019 is?
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