Reference no: EM132927718
Questions -
Q1. At the beginning of current year EDSA Company leased an equipment from a lessor with the following pertinent information: a) Annual rental payable at the end of each year 500,000 b) Lease term 8 years c) Useful life of equipment 10 years d) Implicit interest rate 10% e) PV of an ordinary annuity of 1 for 8 periods at 10% 5.33 f) Present value of 1 for 8 periods at 10% .47. The entity has the option to purchase the equipment on the expiration of the lease term by paying 500,000.00. There is reasonable certainty that the entity shall exercise the option. The entity incurred initial direct cost of 200,000. What is the initial cost of the right of use asset?
Q2. EDSA company operates a customer loyalty program, The entity grants loyalty points for every goods purchased which can be used by the customers in exchange for goods of the entity. The points have no expiry date. During 2020 , the entity issued 50,000 awards credits and expects that 80% of these award credits shall be redeemed. The stand alone selling price of the award credits granted is reliably measured at 1,000,000.00. In 2020, the entity sold goods to customers for a total consideration of 7,000,000 based on stand alone selling price. On December 31, 2020, 15,000 points have been redeemed in exchange for goods. In 2021 the management redeemed 20,000 points. Compute for the revenue to be recognized in 2021.
Q3. At the beginning of current year , EDSA company leased a building with the following information: 1) Annual fixed payment in advance at the beginning of each lease year -1,000,000 2) initial direct cost paid 350,000 3) Lease incentive received -150,000 4) Lease bonus paid to lessor before commencement of lease- 100,000 5) Present value of cost of restoring the building as required by contract discounted at 6% -200,000 6) Purchase option that is not reasonably certain to be exercised - 300,000.00 7) Lease term 5 years 8) Implicit interest rate 8% 9) PV of an annuity of 1 in advance at 8% for 5 periods 4.31 10) PV of 1 at 8% for 5 periods .68. What is the cost of right of use asset?