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Problem 2 ABC Company signed a ten-year noncancelable lease agreement to lease a storage building to a lessee under a sales type lease at the start of this year. At the conclusion of each year, the agreement demanded equal rental payments. The building's fair market value is P7,530,000. The building's carrying amount, on the other hand, is P6,420,000. The structure has a twelve-year projected economic life and no residual value. The title to the building will be transferred to the lessee at the end of the lease. The yearly rental was established by ABC to ensure a 12% return on investment. The lessee is aware of the lessor's implicit rate. The entire yearly lease payment includes P300,000 in executory costs for property taxes. a. What is the minimum annual lease payment? b. What is the total annual lease payment?

Problem 2 ABC Company signed a ten-year noncancelable lease agreement to lease a storage building to a lessee under a sales type lease at the start of this year. At the conclusion of each year, the agreement demanded equal rental payments. The building's fair market value is P7,530,000. The building's carrying amount, on the other hand, is P6,420,000. The structure has a twelve-year projected economic life and no residual value. The title to the building will be transferred to the lessee at the end of the lease. The yearly rental was established by ABC to ensure a 12% return on investment. The lessee is aware of the lessor's implicit rate. The entire yearly lease payment includes P300,000 in executory costs for property taxes. a. What is the minimum annual lease payment? b. What is the total annual lease payment?

Intermediate Accounting: Reporting And Analysis
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 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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Problem 2 ABC Company signed a ten-year noncancelable lease agreement to lease a storage building to a lessee under a sales type lease at the start of this year. At the conclusion of each year, the agreement demanded equal rental payments. The building's fair market value is P7,530,000. The building's carrying amount, on the other hand, is P6,420,000. The structure has a twelve-year projected economic life and no residual value. The title to the building will be transferred to the lessee at the end of the lease. The yearly rental was established by ABC to ensure a 12% return on investment. The lessee is aware of the lessor's implicit rate. The entire yearly lease payment includes P300,000 in executory costs for property taxes. What is the minimum annual lease payment? b. What is the total annual lease payment?
Transcribed Image Text:Problem 2 ABC Company signed a ten-year noncancelable lease agreement to lease a storage building to a lessee under a sales type lease at the start of this year. At the conclusion of each year, the agreement demanded equal rental payments. The building's fair market value is P7,530,000. The building's carrying amount, on the other hand, is P6,420,000. The structure has a twelve-year projected economic life and no residual value. The title to the building will be transferred to the lessee at the end of the lease. The yearly rental was established by ABC to ensure a 12% return on investment. The lessee is aware of the lessor's implicit rate. The entire yearly lease payment includes P300,000 in executory costs for property taxes. What is the minimum annual lease payment? b. What is the total annual lease payment?
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