Compute the rent expense reported in faith company profit

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Question - Faith Company leases a machinery from Love Corporation under a twelve-month operating lease. As an inducement to enter to the lease, Love corporation grants Faith company free rent for the first 2 months. The lease is effective September 1, 2020 and provides for monthly rental of P12,000 to begin on November 1, 2020.

Required -

a) Compute the rent expense reported in Faith Company's profit or loss for the years ended December 31, 2020 and December 31, 2021, assuming Faith elected to apply for this short-term lease the recognition and measurement exemptions under IFRS 16 Leases.

b) Prepare entries for years 2020 and 2021 in the books of Faith Company and Love Corporation.

Reference no: EM133065616

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