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How much is the amount to be capitalized as machinery

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Reference no: EM132729774

On December 31, 2018. Tito Co. signed a 4 year noncancelable lease for a new machine requiring P 120, 000 annual payments beginning December 31,2018. The machine has a useful life of 8 years, with no salvage value. The rate implicit on the lease is 12%.

  • Tito has a bargain purchase option amounting to P20, 000. It is certain that the company will exercise this option. The fair value of the machine at the inception of the lease amounted P447,794.

Problem 1. How much is the amount to be capitalized as machinery (leases asset) on December 31, 2018?

a. 420,926
b. 474,660
c. 480,000
d. 500,000

Problem 2. How much is the interest expense in 2019?

a. Nil
b. 36,111
c. 57,600
d. 60,000

Problem 3. How much is the lease-related liability to be shown as current in the statement of financial position on December 31,2018?

a. 300,926
b. 217,037
c. 83,889
d. 36,111

Problem 4. How much is the lease-related liability to be shown as non-current in the statement of financial position on December 31,2018?

a. 300,926
b. 217,037
c. 83,889
d. 36,111

Reference no: EM132729774

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