What is the lease liability at the end of current year

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Problem - At the beginning of current year, Ashe Company entered into a ten-year non-cancelable lease requiring year-end payments of P1, 000, 000. Ashe's incremental borrowing rate is 12%, while the lessor's implicit interest rate, known to Ashe, is 10%. Present value factors for an ordinary annuity for ten periods are 6.145 at 10%, and 5.650 at 12%. On the same date, Ashe company paid initial direct cost of P 200,000 in negotiating and securing the leasing arrangement. Ownership of the property remains with the lessor at expiration of the lease. The leased property has an estimated economic life of 12 years.

1. What amount should be capitalized as cost of the right of use asset?

2. What is the depreciation for the current year?

3. What is the lease liability at the end of current year?

Reference no: EM132726857

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