On Jan. 1, 2022, ABC Co. sold a machinery to XYZ Co. for P1,900,000. Because of the entity's commitments to its customers to provide their needs for the next 4 years, ABC simultaneously leased back the machinery. The transfer of the asset to the buyer qualifies to be accounted for as a sale under IFRS 15. Information relating to this transaction follows: FV of machinery, P2,200,000 CA of machinery, P1,700,000 Remaining useful life of machinery, 6 years Lease term, 4 years Annual rent payable at the end of each year, P500,000 Market rate of interest, 10% PVF, ordinary annuity, 10%, 4 periods, 3.1699 PVF, ordinary annuity, 10%, 6 periods, 4.3553 PVF, single payment, 10%, 4 periods, 0.6830 PVF, single payment, 10%, 6 periods, 0.5645 What amount of lease liability should ABC record on Jan. 1, 2022?
On Jan. 1, 2022, ABC Co. sold a machinery to XYZ Co. for P1,900,000. Because of the entity's commitments to its customers to provide their needs for the next 4 years, ABC simultaneously leased back the machinery. The transfer of the asset to the buyer qualifies to be accounted for as a sale under IFRS 15. Information relating to this transaction follows:
FV of machinery, P2,200,000
CA of machinery, P1,700,000
Remaining useful life of machinery, 6 years
Lease term, 4 years
Annual rent payable at the end of each year, P500,000
Market rate of interest, 10%
PVF, ordinary annuity, 10%, 4 periods, 3.1699
PVF, ordinary annuity, 10%, 6 periods, 4.3553
PVF, single payment, 10%, 4 periods, 0.6830
PVF, single payment, 10%, 6 periods, 0.5645
What amount of lease liability should ABC record on Jan. 1, 2022?
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