Reference no: EM133188205
Questions -
Q1. On September 1, 2021, Fantastic Company leased furniture and fixtures from Gorgeous Company under a one-year contract. The lease payments are as follows: First 6 months at P12,000 per month; next 6 months at P8,000 per month. How much is the rent expense for the year ended December 31, 2021?
Q2. Cavite Mall grants its customers one reward point for each P100 sales for the year 2021 only. Each point is redeemable in the form of merchandise and is equivalent to P1. The points accumulate and may be used by the customer as part payment for merchandise purchases in the future. During the year, the total sales amounted to P250,000,000. Fair values of merchandise and the reward points are P247,500,000 and P2,500,000, respectively.
By the end of 2021, 50% of the points granted have been redeemed, and it is expected that only 80% of the points granted will be redeemed by the customers. During 2022, Cavite's total sales amounted to P275,000,000 (excluding the additional redemption of 30%) and it revised its estimate of total points expected to be redeemed at 100%.
How much is the total revenue to be recognized in 2022?
Q3. Happy Company grants Incredible Company first month rent-free under a 12-month lease for low-value assets such as furniture, tablets, and laptops. The lease is effective August 1, 2021 and provides for a monthly rental of P12,000, payment of which will begin on September 1, 2021.
How much is the rent expense reported in Happy Company's profit or loss for the year ended December 31, 2021?
Q4. On January 1, 2022, Tiktok Company leased a heavy equipment to be used in its construction business. The following information relates to the lease:
Lease term -10 years
Useful life of the equipment - 12 years
Annual rental payable in advance every January 1 - P240,000
Implicit interest rate - 14%
Incremental borrowing rate - 12%
Tiktok has the option to purchase the leased asset by paying P400,000, which approximates the fair value of the equipment on the option exercise date. (Round off the PV factor to four decimal places)
What is the cost of the right-of-use asset?
Q5. On January 2, 2021, White company leased a machine by signing a 4-year lease contract. Annual rentals of P600,000 are payable every beginning of the year starting January 2, 2021. White did not guarantee the residual value of P100,000 at the end of the lease term. The asset's useful life is estimated to be 5 years, at the end of which, the asset's residual value is expected to be P50,000. White uses straight-line method of depreciation. The interest implicit in the lease is 10%. (Round off the PV factor to four decimal places)
How much depreciation was recorded by White on the right-of-use asset for the year 2021?
Q6. Bergify Corp. has entered into a lease arrangement with Foodie Ltd. in which it has agreed to lease an item of machinery from Foodie Ltd. on the following terms:
Date of commencement of lease - July 1, 2022
Duration of lease - 8 years
Implicit rate of interest - 6%
Initial up-front payment - P200,000
Lease payments at the end of each year - P100,000
The lease is considered non-cancellable. The economic life of the machinery is 10 years. However, Bergify Corp. will return the machinery to Foodie Ltd. at the end of the lease term. At this stage it is expected that the machinery will have a residual unguaranteed value of P80,000 at the end of the lease term. The company uses straight line method. (Round off the PV factor to four decimal places)
How much is the carrying value of the right of use assets on July 1, 2022?
Q7. On January 1, 2021, Small company leased a machine from Huge Company. The following information relates to the lease:
Annual rental payable in advance every January 1 - P500,000
Unguaranteed residual value - P50,000
Implicit interest rate in lease - 12%
Incremental borrowing rate - 15%
Lease term - 6 years
Estimated useful life of the machine - 8 years
What is the balance of Lease Liability at December 31, 2022?
Q8. On January 1, 2022, Bergify Corp. signed a five-year non-cancelable lease for machine with BTS Company. The terms of the lease called for Bergify to make annual payments of P86,680 at the beginning of each year starting January 1, 2022. The machine has an estimated useful life of six years and a P50,000 unguaranteed residual value at the end of the five-year lease term. The machine reverts to the lessor at the end of five-year lease term. Bergify uses straight-line method of depreciation for all of its fixed assets. The implicit rate of the contract which is known by Bergify is 10%. The fair value of the machine on January 1, 2022 is P392,490. Bergify incurred P10,000 to install the machine. Bergify has an obligation to restore the machine to a condition suitable for use at the end of the lease term. Estimated cost of restoration is P20,000. (Round off the PV factor to four decimal places, then do not round off during the computation)
How much is the current portion of the liability to be presented on December 31, 2022?