Reference no: EM132908069
On December 31, 2018, Karen Company signed a 4-year non cancellable lease for a new machine costing Php 150,000 annual payments beginning December 31, 2018. The annual payments includes payment for insurance and property taxes amounting to Php 20,000. On the same date, Karen Company paid Php 40,000 incremental costs that are directly attributable to negotiating and arranging a lease. The machine has a useful life of 8 years with no salvage value. The rate implicit on the lease is 10%. Karen Company guarantees a residual value of Php 50,000 at the end of the lease term. The fair value of the machine at the inception of the lease amounted to Php 518,561.
Require: Based on the above, answer the following:
Problem 1. How much is the amount to be capitalized as machinery on December 31, 2018?
Problem 2. How much is the interest expense in 2019?
Problem 3. How much is the lease related liability to be shown as current in the statement of financial position on December 31, 2018?
Problem 4. How much is the lease related liability to be shown as non current in the statement of financial position on December 31, 2018?
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