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How much is the carrying value of the right-of-use asset

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Question - On January 1, 2022, Monsour Company enters into a seven-year lease of machinery. The building has estimated useful life of 10 years. Lease payments are P2,220,000 per year all payable at the end of each year. To obtain the lease, Monsour Company incurs initial direct cost of P500,000. Monsour guarantees a residual value of P400,000 at the end of lease term. The machine is expected to dismantle at a cost of P75,000 after the lease contract.

Implicit rate in the lease contract, 11%

Effective rate of interest (dismantling), 12%

How much is the carrying value of the right-of-use asset as of December 31, 2023 and the amount of depreciation expense for year 2023?

A. P8,105,475 and P1,541,095

B.  P9.030,132 and P1,078,767

C. P8,107,045 and P1,541,409

D. P9,031,891 and P1,078,986

Reference no: EM133183290

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