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How much depreciation should belle enterprises record

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Reference no: EM132575843

Question 1. On January 1, 2015, Belle Enterprises acquired a machine by signing a four - year lease. Annual rentals of P1,742,174 are payable at the beginning of each year starting January 1,2015. Belle does not guarantee the residual value of P1,200,000 at the end of the lease term. The asset's useful life is 5 years, at the end of which, the asset's scrap value is expected to be P80,000. Bello uses straight line method to depreciate this asset. The lessor's implicit interest rate is 10%, which is known to Bello.

Present value of 1 discounted at 10% for 4 periods is 0.68301.

Present value of 1 discounted at 10% for 5 periods is 0.62092

Present value of annuity due of 1 for 4 periods discounted at 10% is 3.48685.

Present value of ordinary annuity at 10% for 4 periods is 3.16987.

At what amount should this machine be recorded by Belle on January 1, 2015?

a. P 6, 074, 699

b. P 6, 124, 373

c. P 6, 342, 077

d. P 6, 894, 311

Question 2. Use the same information given in 1. How much depreciation should Belle Enterprises record on this machine for the year 2015?

a. P1,208,875

b. P1,362,862

c. P1,423,578

d. P1,518,675

Reference no: EM132575843

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