Reference no: EM132949704
Questions -
Q1) On January 1, 2021, Blue Company acquired a machine by signing a four-year lease. Annual rentals are payable at the beginning of each year starting January 1, 2021. The asset's useful life is 6 years, at the end of which the asset's scrap value is expected to be P80,000. Blue Company uses the straight-line method to depreciate this asset.
The lessor's implicit interest rate, known to Blue is 10%. Blue appropriately recorded the machine and the related liability on January 1, 2021, at P697,380.
PV of an ordinary annuity of 1 at 10% for 4 periods is 3.1699
PV of an annuity due of 1 at 10% for 4 periods is 3.4869
How much is the periodic annual rental payment in the lease contract?
Q2) On March 1, 2021, Green Corporation purchased an equipment for P500,000 with an estimated residual value of P50,000 at the end of its five-year useful life. Green Corporation uses the straight-line method of depreciation.
The equipment was immediately leased to Coco Company for two years at a monthly rental of P18,000 payable at the beginning of the month starting on March 1, 2021. On this date, Coco Company paid Green Corporation a lease bonus of P12,000.
During the year 2021, Green incurred insurance and maintenance costs for the equipment of P8,000 and P2,000, respectively.
How much is Green Corporation's net revenue from this lease for the year ended December 31, 2021?