Reference no: EM133062238

Question - At the beginning of current year, Eleana Company leased equipment from a lessor with the following pertinent information:

Annual rental payable at the end of each year 500,000Lease term 8 years

Useful life of machine 10 years Implicit interest rate 10%

PV of an ordinary annuity of 1 for 8 periods at 10% 5.33Present value of 1 for 8 periods at 10% 0.47

The entity has the option to purchase the equipment on the expiration of the lease term by paying P500,000.

There is reasonable certainty that the entity shall exercise the option. The entity incurred initial direct cost of P200,000.

1. What is the initial cost of the right of use asset?

a. 2,900,000

b. 3,100,000

c. 2,865,000

d. 0

2. What is the interest expense for current year?

a. 290,000

b. 310,000

c. 266,500

d. 316,500

3. What is the lease liability at year-end?

a. 2,690,000

b. 2,790,000

c. 2,398,500

d. 2,848,500

4. What is the depreciation for current year?

a. 310,000

b. 387,500

c. 290,000

d. 362,500