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How much is lease-related liability to be shown as current

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Reference no: EM132825431

On December 31, 2018, Tito Co. signed a 4-year noncancelable lease for a new machine requiring P120,000 annual payments beginning December 31, 2018. The machine has a useful life of 8 years, with no salvage value. The rate implicit on the lease is 12%. Tito has a purchase option amounting to P20,000. It is certain that the company will exercise this option. The fair value of the machine at the inception of the lease amounted to $447,794.

Problem 1. How much is the initial cost of the right of use asset on December 31, 2018?

a. P 500,000

b. P474,660

C. P480,000

d. P420,926

Problem 2. How much is the interest expense in 2019?

a. Nil

b. P60,000

C. P36,111

d. P57,600

Problem 3. How much is the lease-related liability to be shown as current in the statement of financial position on December 31, 2018?

a. P300,926

b. P217,037

C. P83,889

d. P36,111

Problem 4. How much is the lease-related liability to be shown as noncurrent in the statement of financial position on December 31, 2018?

a. P36,111

b. P300,926

C. P83,889

d. P217,037

Reference no: EM132825431

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