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Determine the initial amount of lease liability

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Reference no: EM133098503

Case - ABC leases an asset from XYZ, a lease financier, with the following terms:

Lease Commencement - January 1, 2021

Lease term - 5

Annual rental for the first 3 years - P250,000 and 300,000 for the remaining 2 years

Discount rate is 10%

Initial direct cost - 130,500

The initial direct cost is shouldered by ABC fully.

The useful life of the leased property is 6 years. The asset will revert to the lessor at the end of the lease term. However, at the end of year 4, ABC actually purchased from XYZ at P300,000.

Required -

1. Determine the initial amount of right of use asset?

2. Determine the initial amount of lease liability?

3. Determine the carrying value of the leased asset on December 31, 2023?

Reference no: EM133098503

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