ORDONEZ, PRECIOOUS DANIELA ELLAINE R.

BSA2A

PROBLEM 1

1. Annual rental payable 800,000

Multiply by: PV of OA of 1 at 10% for 4 periods 3.17
Lease Liability 2,536,000

2. Lease liability 2,536,000

Divided by: Sales price at fair value 6,000,000
Multiply by: Carrying amount 4,500,000
Cost of right of use asset 1,902,000

3. Sales price at fair value 6,000,000

Carrying amount (4,500,000)
Total gain 1,500,000

Fair Value 6,000,000

Lease liability (2,536,000)
Right transferred to buyer – lessor 3,464,000

Right transferred to buyer – lessor 3,464,000

Divided by: Sales price at fair value 6,000,000
Multiply by: Total gain 1,500,000
Gain on right transferred 866,000

4. Total cost of the right of use asset 1,902,000

Divided by useful life of equipment 4 years
Depreciation 475,500

PROBLEM 2

Sales price 480,000

Carrying amount (360,000)
Total gain 120,000