Intacc Chapt 11 18 None

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Intacc Chapt 11 18 - NONE
Marine Engineering (Philippine Merchant Marine Academy)
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CHAPTER 11
PROBLEM 11 – 1 pg. 147
At the beginning of the current year, Lessee Company leased a machinery with the following
information:
Annual rental payable at the end of each year 1,000,000
Residual value guarantee 500,000
Payment to lessor to obtain a long-term lease 300,000
Cost of dismantling and restoring the asset as required
By contract at present value 390,000
1. What is the initial lease liability?

2. What is the cost of right use asset?
3. What is the depreciation for current year?
4. What is the lease liability at year-end?

At the beginning of current year, Panorama Company leased a building from a lessor with the following
pertinent information:
Annual rental payable at the end of the year 1,000,000
Initial direct cost paid 400,000
Lease incentive received 100,000
Leasehold improvement 200,000
Purchase option that is reasonably certain to be exercised 500,000
1. What is the cost of the right use of asset?

2. What is the depreciation for current year?
3. What is the interest expense for current year?
4. What is the lease liability at year-end?

At the beginning current year, Ashe Company entered into a ten-year noncancelable lease requiring year-
end payments of P1, 000,000.
Ashes’ incremental borrowing rate is 12%, while the lessor’s implicit interest rate, known to Ashe, is 10%.
Present value factors for an ordinary annuity for ten periods are 6.145 at 10%, and 5.650 at 12%.
On same date, Ashe Company paid initial direct cost of P200, 000 in negotiating and securing the leasing
arrangement.
Ownership of the property remains with the lessor at expiration of the lease. There is no purchase
option.
The leased property has an estimated economic life of 12 years.
1. What amount should be capitalized initially as cost of the right of use asset?
2. What amount should be recognized initially as lease liability?
3. What is the annual depreciation of the right of use asset?

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Neal Company entered into a nine-year lease on a warehouse on December 31, 2019.
Lease payment of P520, 000 which included executory cost of P20, 000 is due annually, beginning on
December 31, 2020 and every December 31 thereafter.
The cost restoring the underlying asset to its original condition as required by the contract is estimated
at the present value of P200, 000
The interest rate implicit in the lease is 9%. The present value of an ordinary annuity of 1 for nine years
at 9% is 5.6
1. What amount should be reported as lease liability on December 31, 2019?

2. What is the cost of the right of use asset?

At the beginning of the current year, Day Company leased a new machine from parr with the following
pertinent information:
Lease term 5 years
Annual rental payable at beginning of each year 500,000
Useful life of machine 8 years
The lease is not renewable and the machine reverts to Parr at the termination of the lease. The cost of
the machine on Parr’s accounting record is P3, 755,000
1. At the beginning of the lease term, what amount should be recorded as cost of right of use asset?
2. What amount should be reported as depreciation of the right of use asset for the current year?

Robbin Company lease a machine with remaining useful life of 14 years form ready leasing company. The
lease required 10 annual payments of P1, 000,000 beginning immediately.
The lease specified an interest rate of 12% and a purchase option of P1, 000,000 at the end of the tenth
year. The lessee is reasonably certain to exercise the purchase option.
1. What amount should be recorded initially as cost of the right of use asset?
2. What amount should be reported as annual depreciation of the night of use asset?

At the beginning of current year, Nori mining Company entered into a 5-year lease for drilling equipment.
The entity accounted for the acquisition at the present value of lease payment of P2, 400,000 which
included a P100, 000 purchase option.
At the end of the lease, the entity is certain to exercise the purchase option.
The entity estimated that the equipment’s fair value will be P200, 000 at the end of the 8-year life. The
entity regularly used straight line depreciation on similar equipment.

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1. What amount should be recognized as depreciation expense on the right of use asset for the current
year?
Helen Company recoded the cost right of used asset at P4, 500,000.
The underlying asset had a useful life of 8 years and the lease term is 5 years.
The asset is expected to have a fair value of P1, 500,000 at the end of 5 years and a fair value of P500,
000 at the end of 8 years.
The lease agreement provided for the transfer of title of the underlying asset to the lessee at the end of
the lease term.
1. What amount of depreciation expense should be recorded for the first year of the lease?

At the beginning of current year, Cola Company signed an 8-year noncancelable lease for a new machine
requiring P750, 000 annual payment at the beginning of each year.
The machine has a useful life of 12 years with residual value of P 150,000
Aggregated lease payments have a present value of P5, 400,000 based on an appropriate interest rate.
Title passes to Cola Company at the lease expiration date. The straight line method of depreciation is
used for all plant assets.
1. What amount should be recognized as depreciation of the right of use asset for the current year?
PROBLEM 11 – 10 pg. 159

At the beginning of current year, Kosovo Company entered into a 10-year lease for an equipment.
The entity accounted for the acquisition at the present value of lease payment of P4, 900,000 which
included a P200, 000 residual value guarantee.
At the end of the lease, the asset will revert back to the lessor.
It is estimated that the asset’s fair value at the end of the 12-year useful life will be P100, 000
The equity regularly used the straight line depreciation on similar equipment.
1. What amount should be recognized as depreciation expense of the right of use asset for the current
year?

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CHAPTER 12
On January 1, 2019, Babson Company lease two automobiles for executive use. The lease required
Babson to make five annual payment of P1, 300,000 beginning January, 1, 2019.
At the end of the lease term, December 31, 2023, the entity guaranteed the residual value of the
automobiles at P1, 000,000.
1. What amount should be reported as lease liability immediately after the first required payment?

On December 31, 2019, Action Company signed a 7-year finance lease for an airplane. The airplane’s fair
value was P8, 415,000.
The entity made the first annual lease payment of P1, 530,000 on December 31, 2019.

2. What amount should be reported as interest expense for 2020?

Oak Company leased equipment for the entire nine-year useful life, agreeing to pay P500, 000 at the
start of the lease term on December 31, 2019, and P500,000 annually on each December 31 for the next
eight years.
The present value on December 31, 2019of the nine lease payments over the lease term using the rate
implicit in the lease which Oak knows to be 10% was P3,165,000.

On December 31, 2019, Roe Company leased a machine from Colt for a five-year period.
Equal annual payments under the lease are P1, 050,000 including P50, 000 annual executor cost and are
due on December 31 of each year.
The first payment was made on December 31, 2019 and the second payment was made on December
31, 2020. The five lease payments are discounted at 10% over the lease term.
1. On December 31, 2020, what amount should be reported as lease liability?

On December 31, 2019, Ames Company leased equipment for 10 years. The entity contracted to pay
P400, 000 annual rent on December 31, 2019, and on December 31 of each of the next years.
The leased liability was recorded at P2, 700,000 on December 31,2019, before the first payment.
The equipment’s useful life is 12 years, and the interest rate implicit in the lease in 10%. The entity used
the straight line method to depreciate all equipment.
1. In recording the December 31, 2020 payment, by what amount should the lease liability be reduced?

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Miracle Company lease machinery with useful life of 10 years for 10 years on January 1, 2019. At the
date, the fair value of the machinery was P4, 900,000.
Annual rentals of P700, 000 are payable in advance on January 1 and the interest rate implicit in the
lease is 9%.
1. What amount should be reported as total liability (principal and interest) on December 31, 2019?

On January 1, 2019, Day Company entered into a 10-year lease agreement with ward Company for
industrial equipment Annual lease payment of P1,000,000 are payable at the end of each year.
The lessor expected a 10% return on the lease which is the implicit rate in the lease.
The equipment is expected to have an estimated useful life of 10 years.
In addition, a third party has guaranteed to pay Ward a residual value of P500, 000 at the end of the
lease.
1. On December 31, 2019, what amount should be reported as principal lease liability?

On December 31, 2019, Rafferty Company leased equipment with annual lease payments of P200, 000
due December 31 for 10 years.
The equipment’s useful life 10 years and the interest rate implicit in the lease is 10%.
The lease obligation was recorded on December 31, 2019 at P1, 350,000 and the first lease payment was
made on that date.
1. What amount should be included in current liabilities in relation to the lease on December 31, 2019?

At the current year end. Mercedez Company purchased a machinery that it had been leasing under a
finance arrangement.
The right of use asset and lease liability were originally recorded at P2,000,000.
At the time of the purchase, the accumulated depreciation on the right of used asset was P800,000 and
the remaining balance of the lease liability was P1,300,000.
The underlying asset was purchased for P1,440,000 cash.
1. What amount should be debited as cost of the machinery on the date of purchase?
PROBLEM 12 – 10 pg. 169

On January 1, 2019, Yemen Company leased an equipment for 6 years from another entity.
The entity recorded the right of use asset at P4,800,000 which included a purchase option of P100,000.
On this date, Yemen Company is certain to exercise the option.
The equipment had an eight-year useful life and a fair value of P300,000 at the end of the useful life.
On January 1, 2025, the entity did not exercise the purchase option.

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1. what amount should be recognized as loss on finance lease in 2025?
PROBLEM 12 – 11 pg. 171

Trojan Company prepared the following lease payments schedule for the lease of a machine from
another entity. The machine had an economic life of six years. The lease agreement required four annual
payments of P33, 000 and the machine will be returned to the lessor at the end of the lease term.
1. What is the amount of executory cost?

2. What is the residual value guarantee?
3. On June 30, 2020, what would Trojan Company record in relation to the lease?
4. What is the annual depreciation expense?

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CHAPTER 13
Alyanna Company entered into a lease of building on January 1, 2019 with the following information:
Annual rental payable at the end of each year 500,000
Lease term 5 years
Useful life building 20 years
Implicit interest rate 10%
PV of an ordinary annuity of 1 at 10% for 5 periods 3.79
The lease contained an option for the lessee to extend for a further 5 years.

2. What amount should be reported as depreciation for 2019?
3. What amount should be reported as new lease liability on January 1, 2022?
4. What is the carrying amount of right of use asset on January 1, 2022?

On January 1, 2019, Variety Company entered into an 8-year lease of a floor of a building with useful life
of 15 years with the following terms:
Annual rental for the first three years payable at the end of each year 300,000
Annual rental for the next five years payable at the end of each year 400,000
PV of an ordinary annuity of 1 at 10% for three periods 2.49
PV of an ordinary annuity of 1 at 10% for five periods 3.79
PV of 1 at 10% for three periods 0.75
1. What amount should be reported as lease liability January 1, 2019?


On January 1, 2019, Milan Company entered into a lease agreement with the following information:
Floor space 1, 500 square meters
Implicit rate in the lease 12%
Lease term 12 years
Present value of an ordinary annuity at 12% for 12 periods 6. 1944
On January 1, 2022, the lessee and the lessor agreed to amend the original terms of the lease with the
following information:
1. What amount should be reported as lease liability on January 1, 2019?

2. What amount should be reported as additional lease liability on January 1, 2022?
3. What amount should be reported as total interest expense for 2022?

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On January 1, 2019, Jones Company entered into a lease for floor space with the following information:
Floor space 5,0000 square meters
Lease term 5 years
Present value of an ordinary annuity of 1 at 10% for 5 periods 3.7908
1. What amount should be reported as lease liability on December 31, 2020 before the modification?
2. What amount should be recorded as termination gain or loss on January 1, 2021?
3. What amount should be recorded as increase in the lease liability due to the modification on January
1, 2021?

On January 1, 2019, Hoyt Company leased an office building with the following terms:
Lease term and useful life of the building 4 years

2. What amount should be reported as increase in the lease liability as a result of the modification on
January 1, 2021??

On January 1, 2019, Yoga Company leased machine with the following information:
Lease term 5 years
On January 1, 2021, the lessee and the lessor agreed to amend the original terms of the lease by
reducing the lease payment by P20, 000 and increasing the implicit rate to 8%.
1. What amount should be reported as lease liability on December 31, 2020 before the modification?
2. What amount should be reported as modified lease liability on January 1, 2021?
4. What amount should be reported as depreciation of the right of use asset for 2021?

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CHAPTER 14
Rapp Company leased a new machine to Lake Company on January 1, 2019. The lease expires on January
1, 2024. The annual rental is P900, 000
Additionally, on January 1, 2019, Lake paid P500, 000 to Papp as a lease bonus and P250, 000 as a
security deposit to be refunded upon expiration of the lease.
1. What amount of rental revenue should be reported for 2019?

At the beginning of current year, Wren Company leased a building to brill under an operating lease for
ten years at P500, 000 per year, payable the first day of each lease year.
Wren Company paid P150, 000 to a real estate broker as a finder fee.
The building is depreciated P120, 000 per year.
1. What amount should be reported as net rent income for the current year?

At the beginning of the current year, Jade Company purchased a new machine for P4, 800,000 and
leased it to East the same day.
The machine has an estimated 12-year life and will be depreciated P400, 000 per year.
The lease is for a three-year period at an annual rental of P850, 000.
Additionally, East Company paid P300, 000 to Jade as a lease bonus to obtain the three-year lease.
1. What amount should be reported as pretax income on the leased asset for the current year?

Myriad Company purchased a tractor on January 1, 2019 at a cost of P1, 600,000 for the purpose of
leasing it.
The tractor is estimated to have a useful life of 5 years with residual value of P100, 000. Depreciation is
on a straight line basis.
On April 1, 2019, Myriad entered into a lease contract for the lease of the tractor for a term of two years
up to March 31, 2021.
1. What amount of net rent revenue should be reported for the current year?

On January 1, 2019, Glen Company leased a building to Dix Company for a ten-year term at an annual
rental of P500, 000
At inception of the lease, Glen received P2, 000,000 covering the first two years’ rent of P1, 000,000 and
a security deposit of P1, 000,000
1. What portion of the P2, 000,000 should be reported as current liability on December 31, 2019?
2. What portion of the P2, 000,000 should be reported as noncurrent liability on December 31, 2019?

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Conn Company owns an office building and normally charges tenants P3, 000 per square meter per year
for office space.
Because the occupancy rate is low, Conn agreed to lease 100 square meters to Hanson Company at P1,
200 per square meter for the first year of a three-year operating lease. Rent for remaining years will be
at the P3, 000 rate.
1. What amount of rental revenue should Conn report from Hanson in the income statement for the year
ended September 30, 2019?

At the beginning of current year, Wall Company leased office premises to fox Company foe a five-year
term.
Under the term of the operating lease, rent for the first year is P800,000 and rent for years 2 through 5 is
P1,250,000 per annum.
1. What is the total rental income over the lease term?

2. What amount should be reported as rental income for the current year?

On July 1, 2019, Gee Company leased a delivery truck to Marr Company under a 3-year operating lease.
Total rent for the term of the lease will be P3, 600,000 payable as follows:
1. What amount should be reported as rent revenue for the year ended June 30, 2020?
2. On June 30, 2021, what amount should be reported as accrued rent receivable?

Abe Company, lessor, leased an equipment under an operating lease.
The lease term is 5 years and the lease payments are made in advance on January 1 of each year as
shown in the following schedule:
1. What amount should be reported as rent income for 2019?

2. On December 31, 2020, what amount should be recognized as accrued rent receivable?
PROBLEM 14 - 10 pg. 197

On January 1, 2019, Abba Company leased a building to Bee Company under a four-year operating lease.
The monthly rental for 2019, 2020, 2021 and 2022 is P100, 000, P150, 000, P200, 000 and P250, 000,
respectively.
Rentals are payable at the end of each month. All rental payments within the year were made when due.
1. What amount should be reported as rent income for 2019?

2. On December 31, 2020, what amount should be reported as rent receivable?

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CHAPTER 15
SALE TYPE LEASE- LESSOR
PROBLEM 15-1 pg.196
At the beginning of current year, Howe company leased equipment to Kew company for an eight-year
period.
Equal payments under the lease are P500,000 and are due at beginning of each year. The first payment
was made at the beginning of current year.
The selling price of the equipment is P2,900,000 and the carrying amount is P2,000,000. The lease is
appropriately accounted for as a sales type lease.
The present value of the lease payments at an implicit interest rate of 12% is P2,780,000.
What amount of gross income on sale should be reported for the current year?
PROBLEM 15-2 pg. 197

Meg company leased equipment from Wee company on July 1, 2019 for an eight-year period expiring
June 30, 2027.
Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was
made on July 1, 2019. The rate of interest contemplated by Meg and Wee is 10%.
The cash selling price of the equipment is P3,520,000 and the carrying amount is P2,800,000. The lease
is appropriately recorded as a sales type lease.
1. What amount of gross income on sale should be recorded for the year ended December
31,2019?
2. What amount of interest revenue should be recorded for the year ended December 31, 2019?
PROBLEM 15-3 pg. 199

Hitech Company, a dealer in machinery and equipment, leased equipment to Quality company on July 1,
2019.
The lease is appropriately accounted for as a sale by Hitech and as a purchase by Quality.
The lease is for a ten-year period equal to the useful life of the asset expiring June 30,2029. The first of
ten equal annual payments of P250,000 was made on July 1, 2019.
Hitech had purchased the equipment for P1,337,500 on January 1, 2019 and established a list selling
price of P1,687,500 on the equipment.
The present value on July 1, 2019 of the rent payments over the lease term discounted at 12” was
P1,582,500.
1. What amount of gross income on sale should be recorded for the year ended December 31,
2019?
2. What amount of interest income should be recorded for the year ended December 31, 2019?
PROBLEM 15-4 pg.201

Vanderbilt company is a dealer in machinery. On January 1, 2019, a machinery was leased to another
entity with the following provisions:
Lease term and useful life of machinery 5 years
Cost of machinery 8,000,000
Residual value-unguaranteed 1,000,000

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PV of an ordinary annuity of 1 for 5 periods at 12% 3.60
PV of 1 for 5 periods at 12% 0.57
At the end of the lease term on December 31, 2023, the machinery will revert to Vanderbilt.
Vanderbilt incurred initial direct cost of P300,000 in finalizing the lease agreement.
1. What amount should be reported as unearned interest income on January 1,2019?
2. What amount should be reported as gross income on sale in 2019?
3. What amount should be reported as interest income for 2019?
PROBLEM 15-5 p. 204

Reagan Company used leases as a method of selling products. In 2019, the entity completed
construction of a passenger ferry.
On January 1, 2019, the ferry was leased to the Super Ferry line on a contract specifying that ownership
of the ferry was transfer to the lessee at the end of the lease period.
Annual lease payments do not include executory costs.
Original cost of the ferry

Fair value of ferry at lease date
Lease payments payable in advance
Estimated residual value
Implicit interest rate
Date of first lease payment
Lease term
Present value of an annuity due
1. What amount should be reported as unearned interest income on January 1, 2019?
2. What amount should be reported as gross income on sale for 2019?
3. What amount should be reported as Interest income for 2019?
PROBLEM 15-6 p.206

Marianas Company adopted the policy of leasing as the primary method of selling its products. The
entity’s main product is a small helicopter that is very popular among politicians and entty managers.
Marianas Company constructed such a helicopter for Jade company at a cost of P8,500,000.
The terms of the lease provided for annual advance payments of P2,500,000 to be paid over 10 years
with the ownership transferring to the lessee at the end of the lease period.
It is estimated that the helicopter will have a residual value of P1,600,000 at that date.
The lease payments began January 1, 2019. Marianas Company incurred initial direcr cost of P500,000 in
financing the lease agreement with Jade. The cash sale price of the helicopter is P14,875,000.
Financing the construction was ar a 14% rate. The present value of an annuity due of 1 at 14% for 10
periods is 5.95.
3. What amount should be reported as Interest income for 2019

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PROBLEM 15-7 P. 208

On January 1, 2019, Ester company leased equipment to Faye company. The lease is for an eight-year
period expiring December 31, 2026.
The first of eight equal annual payments off P900,000 was made on January 1, 2019.
Ester company had purchased the equipment for P4,800,000. The lease is appropriately accounted for as
a sales type lease.
The present value on January 1, 2019 of all rent payments over the lease term discounted at a 10%
interest rate was P5,280,000.
2. What amount of Interest revenue should be recorded in 2019?
3. What amount of Interest revenue should be recorded in 2020?
PROBLEM 15-8 p.210

On January 1, 2019, Gallant Company entered into a lease agreement with Blacksheep company for a
machine which was carried in the accounting records of Gallant at P2,000,000.
Total payments under the lease which expires on December 31, 2028, aggregate P3,550,8000 of which
P2,400,000 represents cost of the machine to Blacksheep.
Payments of P355,080 are due each January 1 of each year.
The interest rate of 10% which was stipulated in the lease is considered fair and adequate compensation
to Gallant for the use of its funds.
Blacksheep expects the machine to have a 10-year life, no residual value and be depreciated on a
straight line basis. The lease is conceived as a sales type lease.
1. What amount should be recognized by Gallant as gross income from sale for the year ended
December 31, 2019?
2. What amount should be recognized as interest income by Gallant for the year ended December
31, 2019?
3. What amount should be reported as pretax total income by Gallant from the lease for the year
ended December 31, 2019?
CHAPTER 16
DIRECT FINANCING LEASE- LESSOR
Computation of annual rental
PROBLEM 16-1 p.212

Camia company is in the business of leasing new sophisticated equipment. As lessir, the entity expects a
12% return.
At the end of the lease term, the equipment will revert to Camia company.

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On January 1, 2019 an equipment is leased to another entity under a direct financing lease.
Cost of equipment to Camia 5,000,000
Residual value- unguaranteed 600,000
Annual rental payable in advance 900,000
Initial direct cost incurred by lessor 250,000
Useful life and lease term 8 years
First lease payment January 1, 2019
1. What is the gross investment in the lease?
3. What amount should be reported as interest income for 2019?
PROBLEM 16-2 p.214

At the beginning of current year, Lessor company leased a machine to lessee company. The machine had
an original cost of P6,000,000. The lease term was five years and the implicit interest rate on the lease
was 15%.
The lease is properly classified as direct financing lease. The annual lease payments of P1,750,000 are
made each December 31.
The machine reverts to Lessor at the end of the lease term, at which time the residual value of the
machine will be P275,000. The residual value is unguaranteed.
1. At the commencement of the lease, what would be the net lease receivable on the part of the
lessor?
2. What is the gross investment in the lease?
PROBLEM 16-3 p. 216

Lyle company entered into a finance lease on January 1,2019. A third party guaranteed the residual value
of the asset under the lease estimated to be P1,200,000 on January 1, 2024, the end of the lease term.
The remaining useful life of the asset value was six years at the commencement of the lease.
Both the lessor and lessee used 10% as the interest rate.
1. What is the net lease receivable of the lessor at the commencement of the lease?
PROBLEM 16-4 p.218

At the beginning of current year, Glade company leased company equipment to Blass company under a
direct financing lease.
The equipment has no residual value at the end of the lease and the lease does not contain bargain
purchase option.
PROBLEM 16-5 p. 219

Cassandra company acquired a specialized packaging machine for P3,000,000 cash and leased it under a
direct financing lease for a period of six years, after which the machine is to be returned to Cassandra
company.
The unguaranteed residual value of the machine is P200,000.

The lease terms are arranged so that a return of 12% is earned by Cassandra.

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What is the annual lease payment payable in advance required to yield the desired return?
PROBLEM 16-6 p. 220

Irene company decided to enter the leasing business. The entity acquired a specialized packaging
machine for P2,300,000.
On January 1, 2019, the entity leased the machine under a direct financing lease for a period of six years,
after which title to the machine is transferred to the lessee.
The six annual lease payments are due each January 1 and the first payment was made on January 1,
2019. The residual value of the machine is P200,000.
The lease terms are arranged so that a return of 12% is earned by Irene company.
What is the annual lease rental payable in advance required to yield the desired return?
PROBLEM 16-7 p. 221
On January 1, 2019, Ultra company leased equipment to another entity under a sales type finance lease.
Rentals are payable at the end of each year, beginning December 31, 2019. The lease term is 6 years and
the useful life of the equipment is 8 years.
The fair value of the equipment is P1,273,800 while the cost is P800,000. The implicit rate in the lease is
12% which is known to the lessee.
The lessee has the option to purchase the equipment for P80,000 at the end of the lease term. It is
reasonably certain that the lessee will exercise the purchase option.
The present value of 1 at 12% for 6 periods is 0.51 and the present value of an ordinary annuity at 12%
for 6 periods is 4.11.
1. What is the annual rental payment?
2. What amount should be reported initially as total financial revenue?
PROBLEM 16-8 p.223
At the beginning of current year, Yolk company signed a ten-year noncancelable lease agreement to
lease a storage building to a lessee under a sales type lease. The agreement required equal rental
payments at the end of each year.
The fair value of the building is P3,075,000. However, the carrying amount of the building is P2,460,000.
The building has an estimated economic life of 10 years with no residual value. At the termination of the
lease, the title to the building will be transferred to the lessee.

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Yolk company set the annual rental to insure a 10% rate to return. The implicit rate of the lessor is known
by the lessee.
The annual total lease payment included P100,000 of executory cost related to taxes on the property.
The present value of an ordinary annuity of 1 at 10% for 10 periods 6.15.
1. What is the minimum annual lease payment?

2. What is the total annual lease payment?
CHAPTER 17
SALE AND LEASEBACK
Problem 17-1 p. 224
At year-end, Bain Company sold a machine with 12-year useful life to another entity and simultaneously
leased it back for one year.
Sale price 360,000

Carrying amount 330,000
Present value of reasonable lease rentals
(P3,000 for 12 months @12%) 34,100
1. What amount of gain on right transferred should be reported in the current year?
Problem 17-2 p.225
At the beginning of current year, Easy Company sold an equipment with remaining life of 10 years and
immediately leased it back fo 4 years at the prevailing market rental.
Sale price at fair value 6,000,000

Carrying amount of equipment 4,500,000
Present value of an ordinary annuity of 1 at 10% for four periods 3.17
1. What amount should be reported as initial lease liability?

2. What is the cost of right of use asset?
3. What amount should be reported as gain on right transferred to the buyer-lessor?
4. What amount should be reported as annual depreciation of the right of use asset?
5. What is the net annual rental income of the buyer-lessor?
Problem 17-3 p. 228

lOMoARcPSD|7481831
At the beginning of current year, Simple Company sold a building with remaining life of 20 years and
immediately leased it back for 5 years.
Sale price at above fair value 20,000,000

Fair value of building 18,000,000
Carrying amount of building 10,800,000
Present value of an ordinary annuity of 1 at 12% for five periods 3.60
1. What amount should b reported as initial lease liability?

4. What is the gross rental income of the buyer-lessor?
5. What is the depreciation of the building of the buyer-lessor?
Problem 17-4 p. 232
At the beginning of current year, Hazel Company sold a machine and immediately leased it back, The
following data pertain to the sale and leaseback transaction:
Sale price at below fair value 4,000,000

Fair value of machine 4,500,000
Carrying amount of machine 3,600,000
Remaining life of machine
Lease term
Implicit interest rate
Present value of an ordinary annuity of 1 at 6% for 3 periods

4. What is the ne annual rent income of the buyer-lessor?
Problem 17-5 p. 235
At the beginning of current year, World Company sold a machine and immediately leased it back. The
following date pertain to the sale and leaseback transaction:
Sale price at fair value 5,000,000

Carrying amount of machine 6,000,000

lOMoARcPSD|7481831

Lease term 5 years
Remaining life of machine 20 years

3. What amount should be reported as loss on right transferred to buyer-lessor?
4. What is the net annual rent income of the buyer-lessor?
Problem 17-6 ; 238
At the beginning of current year, Judy Company sold a building with remaining useful life of 30 years and
immediately leased it back for 5 years.
Sale price at below fair value 18,000,000

Fair value of building 20,000,000
Carrying amount of building 24,000,000

2. What the cost of right of use asset?
3. What amount should be reported as loss on right transferred?
4. What is the net annual rent income of the buyer-lessor?
CHAPTER 18
POSTEMPLOYMENT BENEFITS
Problem 18-1 p.241
Woodstock Company has established a defined benefit pension plan for a lone employee. Annual
payments under the pension plan are equal to the employee’s highest lifetime salary multiplied by 2%
multiplied by number of years with the entity.
On December 31,2019, the employee had worked for Woodstock Company for 10 years. The salary in
2019 was P500,000.
The employee is expected to retire in 25 years and the salary increases are expected to average 3% per
year during that period

lOMoARcPSD|7481831
The employee is expected to live for 15 years after retiring and will receive the first annual pension
payment one year after retirement.
The discount rate is 8%. The relevant present value and future value factors are:
Future value of 1 at 3% for 25 periods 2.094

PV of an ordinary annuity of 1 at 8% for 15 periods 8.559
PV of 1 at 8% for 25 periods 0.146
1. What is the annual pension payment that should be used in computing the projected benefit
obligation on December 31,2019?
2. What is the projected benefit obligation on December 31,2019?
Problem 18-2 p. 243
A director of Easy Company shall receive a retirement benefit of 10% of the final salary per annum for a
contractual period of three years. The director does not contribute to the scheme.
The appropriate discount or settlement rate is 5%.
The anticipated salary over three years is:

2019 1,000,000
2020 1,200,000
2021 1,440,000
Present value of 1 at 5% discount rate

For one period .9524
For two periods .9070
1. What is the annual benefit that should be used in computing the estimated pension liability?
2. Using the projected unit credit method, what is the estimated pension liability on December
31,2020?
Problem 18-3 p. 245
At the beginning of current year, Shiela Company had the following balances related to a defined benefit
plan:
Fair value of plan assets 5,750,000

Projected benefit obligation 6,500,000
The actuary provided the following data for the current year:
Current service cost 600,000

Settlement discount rate 10%

lOMoARcPSD|7481831
Expected return on plan assets 8%

Actual return on plan assets 700,000
Contribution to the plan 900,000
Benefits paid to retirees 100,000
1. What amount should be reported as employee benefit expense?

2. What amount should be reported as remeasurement gain on plan assets?
3. What is the defined benefit cost?
4. What amount should be reported as prepaid/ accrued benefit cost at year-end?
Problem 18-4 p.248
At the beginning of current year, Rachel Company reported the fair value of plan assets at P6,700,000
and projected benefit obligation at P7,600,000. The entity revealed the following information for the
current year:
Current service cost 1,450,000

Past service cost 300,000
Discount rate 10%
Contribution to the plan 1,500,000
1. What amount should be reported as employees benefit expense?

2. What amount should be reported as remeasurement gain or loss on plan assets?
3. What is the fair value of plan assets at year-end?
4. What is the projected benefit obligation at year-end?
Problem 18-5 p. 250
At the beginning of current year, Pedro Company reported fair value of plan assets at P6,500,000 and
projected benefit obligation at P7,500,000.
During the current year, the entity determined that the current service cost was P1,200,000 and the
discount rate is 10%. The actual return on plan assets was P800,000 during the year.
The entity provided the following information during the year related to the defined benefit plan:

Benefits paid to retirees 1,500,000
Decrease in projected benefit obligation to due to change in actuarial assumptions 200,000

lOMoARcPSD|7481831

2. What amount should be reported as total remeasurement gain?
Problem 18-6 p. 252
At the beginning of current year, Trisha Company reported the fair value of plan assets at P6,000,000
and projected benefit obligation at P8,000,000.
During the year, the entity made a lump sum payment to certain plan participants in exchange for their
rights to receive specified postemployment benefits.
The lump sum payment was P800,000 and the present value of the defined benefit obligation settled
was P1,000,000.
In addition, the following fata are gathered during the current year:
Contribution to the plan 700,000
Discount rate 12%

4. What is the accrued benefit cost at year-end?
Problem 18-7 p. 254
At the beginning of current year, Charlton Company provided the following information prior to the
adoption of the revised PAS 19:
Fair value of plan assets 4,750,000

Unamortized past service cost 1,250,000
Projected benefit obligation 5,500,000
Unrecognized actuarial gain 850,000
The transactions for the current year are as follows:

Discount rate 6%

lOMoARcPSD|7481831
Increase in projected benefit obligation due to change in 150,000

actuarial assumptions
1. What is the transitional liability at the beginning of year?

2. What amount should be reported as employee benefit expenses?
3. What amount should be reported as net remeasurement gain?
4. What amount should be reported as prepaid/accrued benefit cost at year-end?
Problem 18-8 p. 256
Rachelleen Company provided the following information during the current year:
January 1 December 31
Fair value of plan assets 6,000,000 7,900,000
Projected benefit obligation 5,000,000 5,900,000
Prepaid/accrued benefit cost - surplus 1,000,000 2,000,000
Asset ceiling 700,000 1,200,000
Effect of asset ceiling 300,000 800,000
During the current year, the following data are gathered:
Current service post 900,000

Decrease in projected benefit obligation due
change in actuarial assumptions 500,000
Discount rate 10%

2. What amount should be reported as net remeasurement gain?
Problem 18-9 p. 258
Apache Company provided the following information for the current year:
January 1 December 31
Fair value of plan assets 3,500,000 5,200,000
Projected benefit obligation 2,000,000 3,100,000
Prepaid/accrued benefit cost – surplus 1,500,000 2,100,000
Asset ceiling 800,000 1,500,000
Effect of asset ceiling 700,000 600,000
The entity gathered the following information for the current year:

lOMoARcPSD|7481831
Discount rate 10%
1. What amount should be reported as employee benefit expense for the year?
2. What amount should be reported as net remeasurement gain or loss for the year?
3. What amount should be reported as prepaid benefit cost on December 31?
Problem 18-10 p. 260
Sandra Company provided the following information for the current year:

Interest expense on PBO 600,000
Interest income on plan assets 350,000
Loss on plan settlement before normal retirement date 250,000
Present value of benefit obligation settled in advance 950,000
Past service cost during the year 300,000
Actual loss on PBO during the year 200,000
Benefits paid to retirees 1,000,000
Discount or settlement rate 10%
1. What amount should be reported as employee benefit expense for the current year?
2. What amount should be reported as net remeasurement for the current year?
3. What amount should be reported as accrued benefit cost at year-end?

Intacc Chapt 11 18 None

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Intacc Chapt 11 18 - NONE

Marine Engineering (Philippine Merchant Marine Academy)

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1. What is the initial lease liability?

PROBLEM 11 – 2 pg. 150

1. What is the cost of the right use of asset?

PROBLEM 11 – 3 pg. 152

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PROBLEM 11 – 4 pg. 153

1. What amount should be reported as lease liability on December 31, 2019?

PROBLEM 11 – 5 pg. 154

PROBLEM 11 – 6 pg. 155

PROBLEM 11 – 7 pg. 156

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PROBLEM 11 – 9 pg. 158

PROBLEM 11 – 10 pg. 159

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PROBLEM 12 – 2 pg. 161

1. What amount should be reported as lease liability on December 31, 2019?

PROBLEM 12 – 3 pg. 162

1. What amount should be reported as lease liability on December 31, 2020?

PROBLEM 12 – 4 pg. 163

1. On December 31, 2020, what amount should be reported as lease liability?

PROBLEM 12 – 5 pg. 164

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PROBLEM 12 – 6 pg. 165

PROBLEM 12 – 7 pg. 166

PROBLEM 12 – 8 pg. 167

PROBLEM 12 – 9 pg. 168

PROBLEM 12 – 10 pg. 169

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1. what amount should be recognized as loss on finance lease in 2025?

PROBLEM 12 – 11 pg. 171

1. What is the amount of executory cost?

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1. What amount should be reported as lease liability on December 31, 2021?

PROBLEM 13 – 2 pg. 177

1. What amount should be reported as lease liability January 1, 2019?

PROBLEM 13 – 3 pg. 179

1. What amount should be reported as lease liability on January 1, 2019?

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PROBLEM 13 – 4 pg. 181

PROBLEM 13 – 5 pg. 183

1. What amount should be reported as lease liability on December 31, 2020?

PROBLEM 13 – 6 pg. 185

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1. What amount of rental revenue should be reported for 2019?

PROBLEM 14 – 2 pg. 189

PROBLEM 14 – 3 pg. 190

PROBLEM 14 – 4 pg. 191

PROBLEM 14 – 5 pg. 192

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PROBLEM 14 – 6 pg. 193

PROBLEM 14 – 7 pg. 194

1. What is the total rental income over the lease term?

PROBLEM 14 – 8 pg. 195

PROBLEM 14 – 9 pg. 196

1. What amount should be reported as rent income for 2019?

PROBLEM 14 - 10 pg. 197

1. What amount should be reported as rent income for 2019?

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