Reference no: EM133234244
1. On January 1, 2021, Red Company leased equipment by signing a four-year lease. Annual rentals of P1,200,000 are payable at the beginning of each year starting January 1, 2021. Red guarantees the residual value of P400,000 at the end of the lease term. The useful life of the equipment is 5 years with estimated scrap value of P100,000. Red uses straight-line method of depreciation. The interest implicit in the lease is 10%. The present value factors are:
PV of 1 discounted at 10% for 4 periods---------0.68301
PV of 1 discounted at 10% for 5 periods---------0.62092
PV of annuity due of 1 for 4 periods at 10%------3.48685
PV of 1 ordinary annuity at 10% for 4 periods---3.16987
What was the carrying value of the right-of-use equipment at December 31, 2021?
2. On January 1, 2021, Green company issued P1,000,000, 12% bonds for P1,065,000, a price that yields 10%. The bonds pay interest semi-annually every January 1 and July 1. Green Company uses the effective interest method of amortizing bond premium/discount. What was the carrying value of the bonds payable at December 31, 2021?
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