Reference no: EM132934888
Questions -
Q1) On December 17, 2020, an explosion occurred at the BTS Army plant in Bulacan causing extensive property damage to area buildings. Although no claims had yet been asserted against BTS Army by March 10, 2021, the management and counsel concluded that it is reasonably possible that BTS Army will be responsible for damages and that P2,500,000 would be a reasonable estimate of its liability. BTS Army's P10,000,000 comprehensive public liability policies have a P500,000 deductible clause.
In BTS Army's December 31, 2020, financial statements that were issued on March 25, 2021, how should this item be reported?
A. As a footnote disclosure indicating the possible loss of P2,500,000.
B. As an accrued liability of P500,000.
C. As an accrued liability of P2,500,000.
D. As a footnote disclosure indicating the possible loss of P500,000.
Q2) Alucard Corp. purchased a tractor on January 1, 2019, at a cost of P1,600,000 for the purpose of leasing it. The tractor is estimated to have a useful life of 5 years with a residual value of P100,000. Depreciation is on a straight-line basis. On April 1, 2019, Aldous entered into a lease contract for the lease of the tractor for a term of two years up to March 31, 2021. The lease fee is P50,000 monthly and the lessee paid P600,000, the lease fee for one year. Alucard paid P120,000 commission associated with negotiating the lease, P15,000 minor repairs, and P10,000 transportation of the tractor to the lessee during 2019.
What amount of net rent revenue should be reported for 2019?
A. P80,000
B. P235,000
C. P85,000
D. P160,000
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