What amount should be recorded as depreciation expense

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Reference no: EM132779256

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Q1) Nordstrom Company entered into a nine-year finance lease of a warehouse on December 31, 2016. Lease payment of P520,000 which includes real estate taxes and other executory cost of P20,000 are due annually beginning December 31, 2017 and every December 31 thereafter. The interest rate implicit in the lease is 9%. The rounded present value of an ordinary annuity of 1 for nine years at 9% is 5.60. What amount should Nordstrom report as lease liability on December 31, 2016?

Q2) On January 1, 2016, Canberra Company signed an eight-year non-cancellable lease for a new machine, requiring P150,000 annual payment at the beginning of each year. The machine has a useful life of 12 years, with no residual value. Title passes to Canberra at the lease expiration date. Canberra uses straight line depreciation for all of its plant assets. On January 1, 2016, aggregate lease payments have a present value of P1,080,000 based on an appropriate rate of interest. What amount should be recorded as depreciation expense of the leased machine for 2016?

Reference no: EM132779256

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