On January 1, 2020, Pia Co. engages in a lease contract to rent a property from Iris, Inc for an annual rental of P80,000, payable in advance. The lease term is for a period of five years, and the first payment has been made on January 1, 2020. The property has a fair market value of P800,000 on date of inception. Under the contract, Pia has the option to buy the property at a price of P655,030. It is reasonably certain that Pia will exercise this option. Expected market price of the property at the end of the lease term is P600,000. Incremental borrowing rate of Pia is 8%. Underlying asset has a useful life of 20 years. How much should Pia recognize as annual depreciation expense in relation to the right of use asset? a. 17,248 b. 39,538 c. 158,154 d. 68,994
On January 1, 2020, Pia Co. engages in a lease contract to rent a property from Iris, Inc for an annual rental of P80,000, payable in advance. The lease term is for a period of five years, and the first payment has been made on January 1, 2020. The property has a fair market value of P800,000 on date of inception. Under the contract, Pia has the option to buy the property at a price of P655,030. It is reasonably certain that Pia will exercise this option. Expected market price of the property at the end of the lease term is P600,000. Incremental borrowing rate of Pia is 8%. Underlying asset has a useful life of 20 years. How much should Pia recognize as annual depreciation expense in relation to the right of use asset? a. 17,248 b. 39,538 c. 158,154 d. 68,994
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
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 14RE: On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment....
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On January 1, 2020, Pia Co. engages in a lease contract to rent a property from Iris, Inc for an annual rental of P80,000, payable in advance. The lease term is for a period of five years, and the first payment has been made on January 1, 2020. The property has a fair market value of P800,000 on date of inception. Under the contract, Pia has the option to buy the property at a price of P655,030. It is reasonably certain that Pia will exercise this option. Expected market price of the property at the end of the lease term is P600,000. Incremental borrowing rate of Pia is 8%. Underlying asset has a useful life of 20 years. How much should Pia recognize as annual depreciation expense in relation to the right of use asset?
a. 17,248
b. 39,538
c. 158,154
d. 68,994
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