Reference no: EM132953103
Question - On January 1, 2020, a lessee leased an office space with 2 floors, for P1,000,000 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%
Required -
QUESTION 1: How much is the interest expense for 2021?
QUESTION 2: How much is the gain or loss on partial termination as of date of modification, if any?
QUESTION 3: The depreciation to be recognized in 2022 is?
QUESTION 4: How much is the carrying value of the lease liability as of December 31, 2022?
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