On Jan 1, 2016, Eminem leased his vacant lot for a period of 12 years to Dr. Dre at an annual rate of P2,400,000. The lease contract provides, among others that Dr. Dre will construct a 5-storey building for paring purposes at a cost of P36,000,000. Ownership of the building shall belong to Eminem upon the expiration or termination of the lease contract. The building was completed on Jan 1,2018 with an estimated useful life of 15 years. It was also agreed that Juan will pay the following in 2016: P 4,800,000 representing rental payment for two (2) years, and P 2,400,000 Security deposit. Assuming Eminem will use outright method in recognizing income from leasehold improvement. Eminem shall report total income from the lease in 2018 at? * A.2,400,000 B.38,400,000 C.36,000,000 D.3,600,000
On Jan 1, 2016, Eminem leased his vacant lot for a period of 12 years to Dr. Dre at an annual rate of P2,400,000. The lease contract provides, among others that Dr. Dre will construct a 5-storey building for paring purposes at a cost of P36,000,000. Ownership of the building shall belong to Eminem upon the expiration or termination of the lease contract. The building was completed on Jan 1,2018 with an estimated useful life of 15 years. It was also agreed that Juan will pay the following in 2016: P 4,800,000 representing rental payment for two (2) years, and P 2,400,000 Security deposit.
Assuming Eminem will use outright method in recognizing income from leasehold improvement. Eminem shall report total income from the lease in 2018 at? *
A.2,400,000
B.38,400,000
C.36,000,000
D.3,600,000
Step by step
Solved in 2 steps
