On January 1, 2022, ABC leased an automobile for use their CEO. The following are the terms under the lease contract: - The lease contract requires ABC to make five annual payments of P400,000 beginning January 1, 2022. At the end of the lease term, December 31, 2026, ABC guarantees that the residual value of the automobile will total P250,000. - The property will be reverted to the lessor at the end of the lease term. - The estimated useful life of the automobile is four years and ABC uses straight-line method for all its assets. - ABC incremental borrowing rate is 8%. The rate is implicit in the lease, which is known to ABC Inc., at 11%. What amount of depreciation expense should be recognized by the ABC at the end of December 2022? How much is the Lease liability to be reported in the statement of Financial Position for the year ended December 31, 2022 by ABC?
On January 1, 2022, ABC leased an automobile for use their CEO.
The following are the terms under the lease contract:
- The lease contract requires ABC to make five annual payments of P400,000 beginning January 1, 2022. At the end of the lease term, December 31, 2026, ABC guarantees that the residual value of the automobile will total P250,000.
- The property will be reverted to the lessor at the end of the lease term.
- The estimated useful life of the automobile is four years and ABC uses straight-line method for all its assets.
- ABC incremental borrowing rate is 8%. The rate is implicit in the lease, which is known to ABC Inc., at 11%.
What amount of
How much is the Lease liability to be reported in the
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
