On September 1, 2021, DHI Sound System Company leased office furniture and equipment at a monthly rental of ₱40,000 for 3 years expiring August 31, 2024. As an inducement for DHI to enter into lease, the lessor permitted DHI to use the asset rent-free from September 1 to November 30, 2021. For the year ended December 31, 2021, how much TOTAL expense should DHI record related to the leased asset
4. On September 1, 2021, DHI Sound System Company leased office furniture and equipment at a monthly rental of ₱40,000 for 3 years expiring August 31, 2024. As an inducement for DHI to enter into lease, the lessor permitted DHI to use the asset rent-free from September 1 to November 30, 2021.
- For the year ended December 31, 2021, how much TOTAL expense should DHI record related to the leased asset?
5. On January 1, 2020, EEE Corp. leased a warehouse for 5 years at an annual rental of ₱575,000 payable every December 31. The equipment had an estimated life of 8 years and shall revert back to the lessor at the expiration of the lease term. The lessee paid the lessor a lease bonus of ₱250,000 and was also responsible as per the lease agreement to pay the broker fees and commission amounting to ₱180,000. As an incentive however, the lessor shall reimburse EEE Corp. 75% of the said initial direct cost. The implicit lease rate known to both parties was at 12% while EEE Corporation’s incremental borrowing rate was at 10%.
Requirements: (Use a PV FACTOR rounded off to 4 decimal places)
- Initial cost of the Right of Use Asset
- Interest expense for 2020
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