On July 1, 2021, Ethan Corporation signed a 5-year non-cancelable lease for a machine with Best Company. The terms of the lease called for Ethan to make annual payments of P150,000 at the beginning of each year starting July 1, 2021. The machine has an estimated useful life of 6 years and a P50,000 guaranteed residual value at the end of the five-year lease term. The machine reverts to the lessor at the end of the five-year lease term. Ethan uses the straight-line method of depreciation for all of its plant assets and adopts the calendar year. The rate implicit in this contract, which is known to Ethan, is 10%. How much is the lease liability recorded on July 1, 2021, after the first annual payment? (Use four decimal places) A. P656,530 B. P506,530 C. P599,665 D. P449,665
On July 1, 2021, Ethan Corporation signed a 5-year non-cancelable lease for a machine with Best Company. The terms of the lease called for Ethan to make annual payments of P150,000 at the beginning of each year starting July 1, 2021. The machine has an estimated useful life of 6 years and a P50,000 guaranteed residual value at the end of the five-year lease term. The machine reverts to the lessor at the end of the five-year lease term. Ethan uses the straight-line method of depreciation for all of its plant assets and adopts the calendar year. The rate implicit in this contract, which is known to Ethan, is 10%.
How much is the lease liability recorded on July 1, 2021, after the first annual payment? (Use four decimal places)
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