Problem 2On January 1, 2022, Miller Textiles leased a cutting machine from Good Machinery.The lease is for five years with bargain purchase option of P100,000. It is reasonablycertain that Miller will exercise the option at the end of the lease period. The machinehas an estimated useful life of 8 years with zero residual value. The lease calls forMiller to make annual payments of P250,000 due at the beginning of each year. Milleruses the straight-line method of depreciation and pays 10% interest on borrowedmoney.The lease contract also requires Miller to make additional variable lease paymentsbased on the increase in consumer price index (CPI) at the start of each yearcompared to the CPI on January 1, 2021. The CPI is 110 on January, 2022, and 120on January 1, 2023.24. What is the carrying amount of the right-of-use asset at the end of 2022? Problem 2On January 1, 2022, Miller Textiles leased a cutting machine from Good Machinery.The lease is for five years with bargain purchase option of P100,000. It is reasonablycertain that Miller will exercise the option at the end of the lease period. The machinehas an estimated useful life of 8 years with zero residual value. The lease calls forMiller to make annual payments of P250,000 due at the beginning of each year. Milleruses the straight-line method of depreciation and pays 10% interest on borrowedmoney.The lease contract also requires Miller to make additional variable lease paymentsbased on the increase in consumer price index (CPI) at the start of each yearcompared to the CPI on January 1, 2021. The CPI is 110 on January, 2022, and 120on January 1, 2023.25. How much is the increase or decrease in lease liability due toremeasurement on January 1, 2023? (Please put – sign if decrease. E.g., -1,000)

Problem 1 Initial measurement of Right of use asset and lease liability As per IFRS 16 Leases: The…

Answered: On January 1, 2022, Miller Textiles…

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

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 6P: Sales-Type Lease with Unguaranteed Residual Value Lessor Company and Lessee Company enter into a...

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Problem 2
On January 1, 2022, Miller Textiles leased a cutting machine from Good Machinery.
The lease is for five years with bargain purchase option of P100,000. It is reasonably
certain that Miller will exercise the option at the end of the lease period. The machine
has an estimated useful life of 8 years with zero residual value. The lease calls for
Miller to make annual payments of P250,000 due at the beginning of each year. Miller
uses the straight-line method of depreciation and pays 10% interest on borrowed
money.
The lease contract also requires Miller to make additional variable lease payments
based on the increase in consumer price index (CPI) at the start of each year
compared to the CPI on January 1, 2021. The CPI is 110 on January, 2022, and 120
on January 1, 2023.
24. What is the carrying amount of the right-of-use asset at the end of 2022?

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Carrying amount of right to use asset at the end of 31st December 2022

= Initial measurement at 1 Jan 2022 - Depreciation for the year

= P1,104,558 - P1,104,558/8 years x 1 year

= P966,488

Hence, the carrying amount of right to use asset at the end of 2022 is = P966,488

Please elaborate this solution and answer. P1,104,558 - P1,104,558 the answer is ZERO, hence if you multipty or divide it with any numbers, the answer would be zero. So, what is the solution for P966,488 answer?

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