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What is the carrying amount of the right-of-use asset

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Question - On January 1, 2022, Mixer Textiles leased a cutting machine from Good Machinery. The lease is for five years with bargain purchase option of P100,000. It is reasonably certain that Mixer will exercise the option at the end of the lease period. The machine has an estimated useful life of 8 years with zero residual value. The lease calls for Mixer to make annual payments of P350,000 due at the beginning of each year. Mixer uses the straight-line method of depreciation and pays 10% interest on borrowed money. At inception of the lease Mixer paid P120,000 initial direct cost.

The lease contract also requires Mixer to make variable lease payments based on the increase in consumer price index (CPI) at the start of each year compared to the CPI on January 1, 2022. The CPI is 110 on January, 2022, and 120 on January 1, 2023.

How much is the increase or decrease in lease liability due to remeasurement on January 1, 2023?

What is the carrying amount of the right-of-use asset at the end of 2022?

Reference no: EM133188114

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