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How much is the rent expense for the year ended december

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Q1) On January 1, 2021, Red Company sold a piece of machinery to Black Company for P1,900,000. Because of the entity's commitments to its customers to provide their needs for the next three years, Red Company simultaneously leased back the machinery.  The transfer of the asset to the buyer qualifies to be accounted for as a sale under IFRS 15. Information relating to this transaction follows:

Fair value of machinery- P2,200,000

Carrying amount of machinery- P1,700,000

Remaining useful life of the machinery- 8 years

Lease term- 3 years

Annual rent payable at the end of each year beginning, December 31, 2021- P500,000

Market rate of interest - 10%

PV of an ordinary annuity of 1 at 10% for 3 periods is 2.4869

PV of an annuity due of 1 at 10% for 3 periods is 2.7355

How much is the lease liability recorded on January 1, 2021?

Q2) On August 1, 2020, Green Company leased furniture and fixtures from Home 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, 2020?

Reference no: EM132949815

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