Reference no: EM132927719
Questions -
Q1. On January 1, 2021 EDSA company entered into an 8 year lease of a floor of building with useful life of 15 years with the following terms: 1) Annual rental for the first three years payable at the end of each year - 300,000 b) Annual rental for the next five years payable at the end of each year - 400,000 c) Implicit interest rate 10% d) incremental borrowing rate 12% e) PV of an ordinary annuity of 1 at 10% for three periods 2.49 , PV of an ordinary annuity of 1 at 10% for five periods 3.79 , PV of 1 at 10% for three periods .75 f) PV of an ordinary annuity of 1 at 12% for three periods 5.92 , PV of an ordinary annuity of 1 at 12% for five periods 4.725 , PV of 1 at 12% for three periods .711. The lease provides for neither a transfer of title to the lessee nor a purchase option. What is the interest expense for 2023?
Q2. At the beginning of the current year, EDSA Company issued 5,000,000 of 12% nonconvertible bonds payable at 103 which are due in five years. In addition, every 1,000 bonds were issued with 30 detachable share warrants, each of which entitled the bondholder to purchase, for 50.00, one ordinary share of UMAK company par value 25.00. On the date of issuance, the quoted market value of each warrant was 4.00. The market value of the bonds ex-warrant at the time of issuance is 95.00. What amount of the proceeds from the bond issue should be recognized as an increase in shareholders' equity?
Q3. 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 lease liability at year end?