ACC 129_Final Quiz

Lea Mae, Inc. leased equipment from Vincy Ann Company under a four-year lease requiring equal annual payments of P86,038, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 5-year useful life and no residual value. Leah Mae, Inc.'s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Leah Mae, Inc.) is 8%, Leah Mae, Inc. uses the straight-line method to depreciate similar assets. PV of Annuity Due at 8% for 4 Periods is 3.5771. PV of ordinary annuity at 8% for 4 periods is 3.3121. Round off prior computations and final answer to the nearest whole number.

What is the amount of depreciation expense recorded by Leah Mae, Inc. in the first year of the asset's life?

Lea Mae, Inc. leased equipment from Vincy Ann Company under a four-year lease requiring equal annual payments of P86,038, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 5-year useful life and no residual value. Leah Mae, Inc.'s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Leah Mae, Inc.) is 8%, Leah Mae, Inc. uses the straight-line method to depreciate similar assets. PV of Annuity Due at 8% for 4 Periods is 3.5771. PV of ordinary annuity at 8% for 4 periods is 3.3121. Round off prior computations and final answer to the nearest whole number.

What is the carrying amount of lease liability after the second lease payment?

On January 1, 2021, Mary Shiene Co. signed an 8-year non-cancelable lease for a new machine, requiring P60,000 annual payments at the beginning of the year. Mary Shiene Co. borrowing rate is 10%. The machine has an estimated life of 12 years, with no salvage value. Title passes to Mary Shiene at the lease expiration date. The company used straight-line depreciation for all its plant assets. PV of Annuity Due at 10% for 8 Periods is 5.8684.

For 2022, Mary Shiene Co. should report the carrying amount of the right of use asset at an amount of

On January 1, 2021, Sheila Mae Inc. enters into a 3-year lease of group of equipment with similar nature. Sheila Mae Inc. assesses that the lease is a lease of an underlying asset of low value and elects to apply the recognition exemptions of PFRS 16. The annual lease payments, payable at the end of each year are P10,000, P15,000, P20,000 for 2021, 2022 and 2023, respectively. As an incentive, the lessor granted the lessee four months for the first year free. The implicit rate of for this lease is 10%.

What amount is the initial amount of right of use asset/lease liability shall be reported in 2021?

• 0

• 10,000

• 45,000

• 35,132

On January 1, 2021, Sheila Mae Inc. enters into a 3-year lease of group of equipment with similar nature. Sheila Mae Inc. assesses that the lease is a lease of an underlying asset of low value and elects to apply the recognition exemptions of PFRS 16. The annual lease payments, payable at the end of each year are P10,000, P15,000, P20,000 for 2021, 2022 and 2023, respectively. As an incentive, the lessor granted the lessee six months for the first year free. The implicit rate of for this lease is 10%.

What amount of expense shall be reported in profit or loss in 2022?

Security deposits, which are refundable to the lessee upon lease termination,

• are treated as prepaid rent by lessees and as unearned income by lessors

• are never discounted.

• are treated as receivable by lessees and as payable by lessors.

• are discounted only by lessees but not by lessors

How much is the initial recognition of right of use asset?

How much is the depreciation expense in 2020?

What amount should be reported as new lease liability on January 1, 2023?

What amount should be reported as depreciation expense for 2023?