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How much is the carrying value of the lease libility

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Question - On January 1, 2020, a lessee leased an office space with 2 floors, for P1,000,00, payable every January 1, starting next year. The lease term was 3 years, while the useful life of the office space was 4 years. The lessee paid P100,000 as lease bonus. The lessor also reimbursed P30,000 to the lessee. The implicit interest rate is 8%.

On January 1, 2022, due to financial difficulties, the lessee and the lessor agreed to modify the lease as follows:

Only 1 floor will be rented.

The annual lease payments will be reduced to P400,000.

The lease term will be extended for 2 more years.

The incremental borrowing rate at this date is 10%.

The depreciation to be recognized in 2022 is?

How much is the carrying value of the lease libility as of December 31, 2022?

Reference no: EM132956099

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