Problem 7-1

Requirement 1
PV of rentals (1,500,000-50,000-100,000*4.3553) ₱ 5,879,655.00
PV of residual value guarantee 0
Present Value of Lease Liability ₱ 5,879,655.00

Lease Liability ₱ 5,879,655.00

Initial Direct costs 200,000
Right of Use Asset ₱ 6,079,655.00

Date Payment Interest Principal

Jan 01,2020
Dec 31,2020 1,350,000.00 587,965.50 762,034.50
Dec 31,2021 1,350,000.00 511,762.05 838,237.95
Dec 31,2022 1,350,000.00 427,938.26 922,061.75
Dec 31,2023 1,350,000.00 335,732.08 1,014,267.92
Dec 31,2024 1,350,000.00 234,305.29 1,115,694.71
Dec 31,2025 1,350,000.00 122,735.82 1,227,264.18

GENERAL JOURNAL
Date Page Number 01
Description PR
2020 Debit
Jan-01 Right of use asset ₱ 6,079,655.00
Lease Liability
Cash
*To record right of use asset and lease liabilty

Dec-31 Lease Liability ₱ 762,034.50

Interest Expense ₱ 587,965.50
Tax Expense ₱ 50,000.00
Insurance Expense ₱ 100,000.00
Cash
*to record annual lease payments

Depreciation ₱ 1,013,275.83
Accumulated Depreciation

Right of use asset ₱ 6,079,655.00

Less: Residual Value of warehouse 0
Depreciation cost ₱ 6,079,655.00
Divided By: Lease Term 6
 Annual Depreciation ₱ 1,013,275.83

Requirement 2

Right of use asset- Jan 01 2020 ₱ 6,079,655.00

Less: Accumulated Depreciation (1,013,257.83*3) 3,039,773.50
Carrying Amount of Right of use asset- Dec 31.2022 ₱ 3,039,881.50

Requirement 3
Interest Expense ₱ 587,965.50
Tax Expense 50,000.00
Insurance Expense 100,000.00
Depreciation 1,013,275.83
Total Expenses ₱ 1,751,241.33

Requirement 4

Carrying Amount- Dec 31,2020 ₱ 5,117,620.50

Less: Principal paid 838,237.95
Carrying Amount of Lease Liability- Dec 31-2021 ₱ 4,279,382.55

Annual Payment ₱ 1,500,000.00

Less:
Tax 50,000.00
Insurance 100,000.00
Interest (4,279,382.55*0.10) 427,938.26
Current Portion of Lease Liability ₱ 922,061.74

Carrying amount of lease liability - Dec 31,2021 ₱ 4,279,382.55

Current portion of lease liability 922,061.74
Non Current Portion of lease liability ₱ 3,357,320.81
Principal Present Value
5,879,655.00
762,034.50 5,117,620.50
838,237.95 4,279,382.55
922,061.75 3,357,320.81
1,014,267.92 2,343,052.89
1,115,694.71 1,227,358.17
1,227,264.18 93.99

Page Number 01
Credit

₱ 5,879,655.00
₱ 200,000.00

₱ 1,500,000.00

₱ 1,013,275.83
Problem 7-2

Requirement 1

PV of rentals(720,000-24,705*6.3282) ₱ 4,399,965.82
Indirect Cost -
Cost of right of use asset ₱ 4,399,965.82

Requirement 2

Date Payment Interest Principal

Dec 31,2019 695,295.00 695,295.00

Dec 31,2020 695,295.00 444,560.50 250,734.50
Dec 31,2021 695,295.00 414,472.36 280,822.64

Lease Liability - Dec 31,2020 ₱ 3,453,936.32

Lease Liability - Dec 31,2021 3,173,113.68
Current Portion of lease liability - Dec 31,2020 ₱ 280,822.64

Requirement 3

Lease Liability - Dec 31,2020 ₱ 3,453,936.32

Current Portion of lease liability - Dec 31,2020 280,822.64
Non Current Portion of lease liability ₱ 3,173,113.68

Requirement 4

Executory cost ₱ 24,705.00

Depreciation Cost 366,663.82
Total Lease related expense ₱ 391,368.82

Right of use asset ₱ 4,399,965.82

Less: Residual Value -
Depreciable cost 4,399,965.82
Divided by: Useful life 12.00
Annual Depreciation ₱ 366,663.82
Principal Present Value
4,399,965.82
695,295.00 3,704,670.82
250,734.50 3,453,936.32
280,822.64 3,173,113.68
PV of rentals(720,000-24,705*5.6502) 3,928,555.81
Purchase Option (100,000*0.3220) 32200
Cost of right of use asset ₱ 3,960,755.81

Requirement 2

Date Payment Interest Principal

Dec 31,2019
Dec 31,2020 695,295.00 475,290.70 220,004.30
Dec 31,2021 695,295.00 448,890.18 246,404.82
Dec 31,2022 695,296.00 419,321.60 275,974.40
Dec 31,2023 695,297.00 386,204.67 309,092.33
Dec 31,2024 695,298.00 349,113.60 346,184.40
Dec 31,2025 695,299.00 307,571.47 387,727.53
Dec 31,2026 695,300.00 261,044.16 434,255.84
Dec 31,2027 695,301.00 208,933.46 486,367.54
Dec 31,2028 695,302.00 150,569.36 544,732.64
Dec 31,2029 695,303.00 85,201.44 610,101.56

Lease Liability - Dec 31,2020 ₱ 3,740,751.51

Lease Liability - Dec 31,2021 3,494,346.69
Current Portion of lease liability - Dec 31,2020 ₱ 246,404.82

Requirement 3

Lease Liability - Dec 31,2020 ₱ 3,740,751.51

Current Portion of lease liability - Dec 31,2020 246,404.82
Non Current Portion of lease liability ₱ 3,494,346.69

Requirement 4

Executory cost ₱ 24,705.00

Depreciation Cost 330,062.98
Total Lease related expense ₱ 354,767.98

Right of use asset ₱ 3,960,755.81

Less: Residual Value -
Depreciable cost 3,960,755.81
Divided by: Useful life 12.00
Annual Depreciation ₱ 330,062.98
Principal Present Value
3,960,755.81
220,004.30 3,740,751.51
246,404.82 3,494,346.69
275,974.40 3,218,372.29
309,092.33 2,909,279.96
346,184.40 2,563,095.56
387,727.53 2,175,368.03
434,255.84 1,741,112.19
486,367.54 1,254,744.65
544,732.64 710,012.01
610,101.56 99,910.45