Reference no: EM133017957

Question - On January 1, 2020, Marian Company sold a machinery to Marjorie Company for P1,900,000. Because of the entity's commitments to its customers to provide their needs for the next four years, Marian Company simultaneously leased back the machinery. The transfer of the asset to the buyer qualifies to be accounted for as a sale under IFRS 15. Information relating to this transaction follows:

Fair value of machinery 2,200,000

Carrying amount of machinery 1,700,000

Remaining useful life of machinery 8 years

Lease term 5 years

Annual rent payable at the end of each year 500,000

Market rate of interest 10%

1) How much is the gain on sale Leaseback?

a) P71,602

b) P139,784

c) P185,239

d) P500,000

2) Use the same information given. What are the amounts recorded by Marian Company for the right-of-use asset and lease liability, at January 1, 2020?

a) P1,456,552; P1,584,950

b) P1,456,552; P1,885,950

c) P1,456,552; P1,284,950

d) P1,884,950; P1,456,552

3) Use the same information given. How much is the interest expense recognized by Marian Company for the year ended December 31, 2020?

a) P158,495

b) P188,595

c) P145,655

d) P220,000