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How much is the depreciation expense for the year ended dec

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Reference no: EM132575848

Question 1. On December 31,2015, Simon Company leased a new machine from Junction Company with the following pertinent information:

Lease term - 6 years; Useful life of machine - 6 years

Annual rental payable every December 31 P500,000

Simon's incremental borrowing rate 15%

Implicit interest rate in lease (known by Simon) 12%

Present value of annuity of 1 in advance for 6 periods

at 12% - 4.61 ; at 15% - 4.35

The machine reverts to Junction at the termination of the lease. The cost of the machine on Junction's accounting records is P3,755,000.

At what amount should Simon record the asset at December 31, 2015?

a. P 3,755,000

b. P 2,305,000

c. P 2,175,000

d. P 0

Question 2. Use the same information given in 1. What is the lease liability balance at December 31, 2016?

a. P 1,805,000

b. P 1,851,600

c. P 1,581,600

d. P 1,521,600

Question 3. Use the same information given in 1. Assuming that Simon uses straight -line method of depreciation, how much is the depreciation expense for the year ended December 31, 2017?

a. P 384,167

b. P 362,500

c. P 288,125

d. P 271,875

Reference no: EM132575848

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