At the beginning of the current year, MJ Company sold a building with remaining useful life of 30 years and immediately leased it back for 5 years. Sale price at below fair value was P18,000,000. Fair value of the building is 20,000,000. Carrying amount of the building is P24,000,000 with annual rental payable at the end of each year at P1,000,000. Implicit rate is 12% and PV of an ordinary annuity of 1 at 12% for 5 periods is 3.60. How much is the initial lease liability? How much is the cost of right of use asset? How much is the loss on right transferred?
At the beginning of the current year, MJ Company sold a building with remaining useful life of 30 years and immediately leased it back for 5 years. Sale price at below fair value was P18,000,000. Fair value of the building is 20,000,000. Carrying amount of the building is P24,000,000 with annual rental payable at the end of each year at P1,000,000. Implicit rate is 12% and PV of an ordinary annuity of 1 at 12% for 5 periods is 3.60. How much is the initial lease liability? How much is the cost of right of use asset? How much is the loss on right transferred?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 11E: On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an...
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At the beginning of the current year, MJ Company sold a building with remaining useful life of 30 years and immediately leased it back for 5 years. Sale price at below fair value was P18,000,000. Fair value of the building is 20,000,000. Carrying amount of the building is P24,000,000 with annual rental payable at the end of each year at P1,000,000. Implicit rate is 12% and PV of an ordinary annuity of 1 at 12% for 5 periods is 3.60.
- How much is the initial lease liability?
- How much is the cost of right of use asset?
- How much is the loss on right transferred?
- What is the interest expense of the seller-lessee for the current year?
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