On January 1, 20x1, Entity X sells a building to Entity Y for ₱900,000 cash and simultaneously leases the building back. Additional information follows: Fair value of building 1,000,000 Carrying amount of building 800,000 Remaining useful life of building 10 years Lease term 5 years Annual rent payable at the end of each year 100,000 Implicit interest rate equal to Market rate 12% The transfer qualifies as a sale under PFRS 15. What amount of gain should Entity X recognize at lease commencement date? 0 107,904 263,244 174,904
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On January 1, 20x1, Entity X sells a building to Entity Y for ₱900,000 cash and simultaneously leases the building back. Additional information follows:
|
Fair value of building |
1,000,000 |
|
Carrying amount of building |
800,000 |
|
Remaining useful life of building |
10 years |
|
Lease term |
5 years |
|
Annual rent payable at the end of each year |
100,000 |
|
Implicit interest rate equal to Market rate |
12% |
The transfer qualifies as a sale under PFRS 15. What amount of gain should Entity X recognize at lease commencement date?
-
0
-
107,904
-
263,244
-
174,904
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- 6. Entity X sells a building to Entity Y and simultaneously leases Sale and leaseback 6. Entity X sells a building to Entity Y and simultaneously it back. Relevant information follows: P2,000,00 Cash selling price of building Fair,value of building Carrying amount of building Annual rent payable at the end of each year 1,800,00 1,000,00 120,000 18 years Lease term 4.5% Implicit interest rate (readily determinable to Entity X) The terms and conditions of the transaction are such that the transfer of the building qualifies as a sale under PFRS 15. Requirements: Prepare the journal entries in the books of Entity X (seller-lessee) and Entity Y (buyer-lessor) on lease commencement. (Adapted - IFRS 16. IE11)Bitag is a dealer in machinery. On January 1, 2023, a machinery was leased toanother entity with the following provisions: Annual rental payable at the end of each year 2,000,000Lease term and useful life of machinery 5 yearsCost of machinery 6,000,000Residual value – guaranteed 1,000,000Implicit interest rate 12%PV of an ordinary annuity of 1 for 5 periods at 12% 3.60PV of 1 for 5 periods at 12% 0.57 There is no transfer of title nor bargain purchase option. What amount should be reported as sales revenue? 7,770,00010,000,0007,200,0007,000,000 What is the interest income for 2023? 932,400864,000840,000880,000Bitag is a dealer in machinery. On January 1, 2023, a machinery was leased toanother entity with the following provisions: Annual rental payable at the end of each year 2,000,000Lease term and useful life of machinery 5 yearsCost of machinery 6,000,000Residual value – guaranteed 1,000,000Implicit interest rate 12%PV of an ordinary annuity of 1 for 5 periods at 12% 3.60PV of 1 for 5 periods at 12% 0.57 There is no transfer of title nor bargain purchase option. What amount of cost of goods sold should be reported? 5,430,0006,000,0007,000,0007,200,000
- Christina Co. has a factory equipment with a carrying amount of P700,000 and has a remaining useful life of 7 years. On January 1, 2020, Christina agreed to an exchange transaction with Kat & Inc. to transfer the equipment to the latter. The transfer satisfied the requirements of PFRS 15 to be a sale and Christina immediately leased it back for a lease term equal to the remaining life of the equipment. The sales price amounted to P500,000 while annual rental payable at the end of each year is P100,000 for an implicit rate of 10%. Selling price is equal to fair value. How much loss shall Christina recognize in relation to the sale and leaseback transaction? a. 681,578.63 b. 200,000 c. 194,736.75 d. 5,263.25On January 1, 2020, Morris Company sells land to Lopez Corporation for $10,000,000, and immediately leases the land back. The following information relates to this transaction: 1. The term of the noncancelable lease is 20 years and the title transfers to Morris Company at the end of the lease term. 2. The land has a cost basis of $8,400,000 to Morris. 3. The lease agreement calls for equal rental payments of $943,074 at the beginning of each year. 4. The land has a fair value of $10,000,000 on January 1, 2020. The incremental borrowing rate of Morris Company is 10%. Morris is aware that Lopez Corporation set the annual rentals to ensure a rate of return of 8%. 5. 6. Morris Company pays all executory costs which total $255,000 in 2020. 7. Collectibility of the rentals is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor. Instructions Prepare the journal entries for the entire year 2020 on the books of Morris Company…3. On January 1, 2019, an entity sold a building with remaining life of 20 years, and immediately leases it back for 5 years. The following information is available: Sale price - 20,000,000 Fair value of building - 18,000,000 Carrying amount of building - 10,000,000 Annual rental payable at the end of each year - 1,500,000 Implicit interest rate - 6% Determine the following at the commencement at seller-lessee’s perspective (use 3-decimal PVF). How much is the gain or loss on right transferred? (Round off final answer to whole number)
- At the start of the current year, Grace Company sold a building andimmediately leased it back, The following data pertain to the sale andleaseback transaction: Sale price at above fair value P9M; FV of the buildingis P8M, with carrying amount of P7,200,000 and annual rental payable atthe end of each year at P600,000. The remaining life of the building is 20years and the lease term is 4 years. The implicit interest rate is 12%. PV of anordinary annuity of 1 at 12% for 4 years is 3.037. 1. What is the initial lease liability? 2. What is the cost of the right of use asset? 3. What is the gain on right transferred to buyer-lessor? and what is the annual rental income of buyer-lessor?Assume that on January 1, 2019, JK Restaurants sells a computer system to High Finance Company for P510, 000 and immediately leases the computer system back. The relevant information is as follows:1. The computer was carried at JK’s books at a value of P450, 000.2. The term of the noncancelable lease is 10 years. Title will transfer to JK.3. The lease agreement requires equal rental payments of P83, 000.11 at the end of each year.4. The incremental borrowing rate for Elmer is at 12%. Elmer is aware that High Finance Co., set the annual rental to ensure a rate of return of 10%5. The computer has a fair value of P680, 000 on January 1, 2019, and an estimated economic life of 10 years.6. Elmer pays executory costs of P9, 000 a year.Instructions:Prepare the journal entries for both the lessee and the lessor for 2019 to reflect the sale-leaseback agreement. No uncertainties exist, and collectability is reasonably certain.On December 31, 2020, Lesley Co. signed a 10-year noncancelable lease agreement to lease a storagebuilding from Stark Company. The following information pertains to this lease agreement: The agreement requires equal rental payments of ₱720,000 beginning on December 31, 2020. The fair value of the building on December 31, 2020 is ₱4,400,000. The building has an estimated economic life of 12 years, with an unguaranteed residual value of₱100,000. Lesley depreciates similar buildings on the straight-line method. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. The interest implicit in the lease is 12% per year. The yearly rental payment includes ₱20,705 of executory costs related to taxes on the property.QUESTIONS: (Round off present value factors to 5 decimal places)1. What amount should be capitalized as the cost of the leased storage building?2. What amount should be included in the current liabilities section of Lesley’s statement…
- Maureen Inc. is a dealer of machinery. On January 1, 2020, it leased a machinery to another entity under the following terms:· Annual rental payable at the end of each year: 1,500,000· Lease term and useful life of machinery: 5 years· Cost of machinery in Maureen’s books: 4,000,000· Fair value of machinery on commencement: 6,000,000· Guaranteed residual value upon return: 500,000· Implicit rate: 12%Relevant PV factors are: PV of ordinary annuity for 5 periods at 12% is 3.60 and PV of 1 for 5 periods at 12% is 0.57. Machinery will revert back to Maureen at end of lease term. Fair value of the asset on December 31, 2024 (end of lease) is 350,000. Maureen also incurred initial direct costs of P200,000. How much is the gross profit of Maureen on January 1, 2020? a. 1,800,000 b. 1,485,000 c. 1,685,000 d. 2,000,000Britney Co. has a factory equipment with a carrying amount of P700,000 and has a remaining useful life of 7 years. On January 1, 2020, Britney agreed to an exchange transaction with Rihanna & Inc. to transfer the equipment to the latter. The transfer satisfied the requirements of PFRS 15 to be a sale and Britney immediately leased it back for a lease term equal to the remaining life of the equipment. The sales price amounted to P850,000 while annual rental payable at the end of each year is P140,000 for an implicit rate of 10%. Fair value of the equipment is P900,000 How much right-of-use asset shall Britney recognize in relation to the sale and leaseback transaction? a. 32,426.96 b. 569,005.60 c. 700,000 d. 530,116.72On December 31,2021, PAUL Corporation sold for P480,000 an old machine having an original cost of P800,000 and a book value of P60,000, the term of the sale were as follows: P120,000 down payment P120,000 payable on December 31 each of the next three years The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of Transaction. What should be the amortized cost of the note receivable on December 31,2022?