How much income is to be reported by the lessor

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Reference no: EM132779378

On July 1, 2017, Mr. V leased his vacant lot for a period of 12 years to Mr. J at an annual rate of P2,400,000. It was also agreed that Mr. J will pay the following:

P4,800,000 representing rental payment for year 2017 and 2018
Security deposit of 2,400,000
Annual real property tax of P30,000

The lease contract provides among others that the lessee will construct a 5-storey building for parking purposes at a cost of P36,000,000. Ownership of the building shall belong to the lessor upon the expiration or termination of the lease contract.

Problem 1: The building was completed on July 1, 2019 with an estimated useful life of 15 years. Assuming that due to the fault of the lessee, the lease contract was terminated on January 1, 2021, how much income is to be reported by the lessor in 2021?

Reference no: EM132779378

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