On January 1, 2016, Paete Company signed a 12-year lease for a building. Paete has an option to renew the lease for an additional 8-year period on or before January 1, 2020. During January 2018, Paete made substantial improvements to the building. The cost of the improvements was P3,600,000, with an estimated useful life of 15 years. At December 31, 2018, Paete intended to exercise the renewal option. Paete has taken a full year’s amortization on this improvement. What should be the depreciation charge for the year ended 31 December 2018?

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
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 9MC
icon
Related questions
Question

On January 1, 2016, Paete Company signed a 12-year lease for a building. Paete has an option to renew the lease for
an additional 8-year period on or before January 1, 2020. During January 2018, Paete made substantial improvements to
the building. The cost of the improvements was P3,600,000, with an estimated useful life of 15 years. At December 31,
2018, Paete intended to exercise the renewal option. Paete has taken a full year’s amortization on this improvement.
What should be the depreciation charge for the year ended 31 December 2018?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Lease accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
SWFT Comprehensive Vol 2020
SWFT Comprehensive Vol 2020
Accounting
ISBN:
9780357391723
Author:
Maloney
Publisher:
Cengage
SWFT Individual Income Taxes
SWFT Individual Income Taxes
Accounting
ISBN:
9780357391365
Author:
YOUNG
Publisher:
Cengage
Individual Income Taxes
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
CONCEPTS IN FED.TAX., 2020-W/ACCESS
CONCEPTS IN FED.TAX., 2020-W/ACCESS
Accounting
ISBN:
9780357110362
Author:
Murphy
Publisher:
CENGAGE L
Financial Accounting Intro Concepts Meth/Uses
Financial Accounting Intro Concepts Meth/Uses
Finance
ISBN:
9781285595047
Author:
Weil
Publisher:
Cengage