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How much are the lease liability

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Reference no: EM133130325

Question - On January 1, 20x1, Sunset Co. leased a machine from April, Inc.

Information on the lease is as follows:

Annual rent: P200,000

Lease Term: 10 years

Useful Life of machine: 12 years

Implicit interest rate: 10%

Lessee's incremental borrowing rate: 11%

The lease payments, which are due at the start of each year, are linked to the Consumer Price Index (CPI) and will be updated after every two years. The CPIs are: 100 on Jan. 1, 20x1; 105 on Dec. 31, 20x1; and 108 on Dec. 31, 20x2. How much are the (1) lease liability and (2) right-of-use asset on Dec.31, 20x3?

a. 940,736; 1,028,420

b. 940,736; 1,229,420

c. 1,156,736; 1,229,420

d. 1,156,736; 1,028,420

Reference no: EM133130325

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