On April 1, 2021, Xai Company acquired a machine by signing a four-year lease. Annual rentals of P1,742,174 are payable at the beginning of each lease year starting April 1, 2021. Xai is given the option to buy the machine for P250,000 on April 1, 2025, when the asset's market price is expected to be P1,250,000. The asset's useful life is 6 years, at the end of which the asset's scrap value is expected to be P600,000. Xai uses the straight-line method to depreciate this asset. With an implicit interest rate of 10%, Xai appropriately recorded the machine and the related liability on April 1, 2021 at P6,245,450. Xai Company follows the calendar year as its accounting period. 1. How much is the depreciation expense recognized by Xai for the years ended December 31, 2022 and December 31, 2021? A. P940,908 and P705,681 B. P1.411,363 and P1,058,522 C. P1,040,833 and P780,625 D. P1.561,363 and P1,171,022
On April 1, 2021, Xai Company acquired a machine by signing a four-year lease. Annual rentals of P1,742,174 are payable at the beginning of each lease year starting April 1, 2021. Xai is given the option to buy the machine for P250,000 on April 1, 2025, when the asset's market price is expected to be P1,250,000. The asset's useful life is 6 years, at the end of which the asset's scrap value is expected to be P600,000. Xai uses the straight-line method to
With an implicit interest rate of 10%, Xai appropriately recorded the machine and the related liability on April 1, 2021 at P6,245,450. Xai Company follows the calendar year as its accounting period.
1. How much is the depreciation expense recognized by Xai for the years ended December 31, 2022 and December 31, 2021?
A. P940,908 and P705,681
B. P1.411,363 and P1,058,522
C. P1,040,833 and P780,625
D. P1.561,363 and P1,171,022
Step by step
Solved in 2 steps with 1 images
