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What are the amounts recorded by Marian Company

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Question - On January 1, 2020, Marian Company sold a machinery to Marjorie Company for P2,200,000, an amount that is equal to its fair value. Because of the entity's commitments to its customers to provide their needs for the next four years, Marian Company simultaneously leased back the machinery. The transfer of the asset to the buyer qualified to be accounted for sale under IFRS 15. Information relating to this transaction follows:

Carrying amount of machinery 1,700,000

Remaining useful life of machinery 8 years

Lease term 4 years

Annual rent payable at the end of each year 500,000

Market rate of interest 10%

1) How much is the gain on sale leaseback recognized by Marian Company at January 1, 2020?

a) P500,000

b) P360,216

c) P139,784

d) P125,000

2) Using the preceding data, what are the amounts recorded by Marian Company for the right-of-use asset and lease liability, respectively, at January 1, 2020?

a) P1,224,734; P1,584,950

b) P1,584,950; P1,224,734

c) P2,051,112; P2,200,000

d) P2,200,000; P1,700,000

Reference no: EM132999927

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