On December 31, 2019, an entity leased two automobiles for executive use. The lease required the entity to make five annual payments of P1,500,000 beginning December 31, 2019. At the end of the lease term, December 31, 2024, the entity had a residual value guarantee of the automobiles at P1,000,000. The interest rate implicit in the lease is 10% and present value factors at 10% for 5 periods are 4.17 for an annuity due, 3.79 for an ordinary annuity and 0.62 for present value of 1. What is the lease liability on December 31, 2020?  What is the current portion of the lease liability on December 31, 2020?  What is the interest expense for 2020?

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.