What amount of the bond discount should be amortized

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Reference no: EM132780611

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Q1. Kobie Company leased an equipment to a lessee on January 2, 2020 under a direct financing lease with the following provisions - cost of equipment P3,390,000; Annual rental payable at the end of the year P600,000; Useful life and lease term, 10 years. Kobie Company incurred and paid P143,400 in negotiation and arranging the lease. The present value of an ordinary annuity of 1 at 12% for 10 years is 5,650 and the present value of an ordinary annuity of 1 at 11% for 10 years is 5.889. What is the total financial revenue to be recognized over the lease term?

Q2. Dynasty Company sells gift certificates redeemable only when merchandise is purchased. Upon redemption, Dynasty Company recognizes the unearned revenue as realized. Information for 2019 is as follows: Unearned Revenue, January 1, 2019 P650,000; Gift certificates sold P2,250,000; Gift certificates redeemed P1,950,000; Gift certificates unredeemed for a long time P100,000; Cost of Goods Sold 60%. What amount should be reported as Unearned Revenue on December 31, 2019, following the ruling by the Department of Trade and Industry that gift certificates no longer have an expiration period?

Q3. Long Live Company entered into a lease agreement for the use of a new machine on January 1, 2020. The lease agreement requires an annual payment of P1,500,000 for five years starting December 31, 2020. Long Live guaranteed a residual value of P711,090 at the end of the contract. The machine will revert to the lessor at the end of five years. The machine has an economic life of 10 years. The implicit rate for this lease is 16% where the present value of 1 for five periods is 0.4761 and the present value of an ordinary annuity of 1 is 3.2743. What is the balance of lease liability on December 31, 2020?

Q4. On July 1, 2019, Peter Company issued 4,000 of its 8%, P1,000 face value bonds payable for P3,504,000. The bonds were issued to yield 10%. The bonds are dated July 1, 2019 and mature July 1, 2029. Interest is payable semiannually on January 1 and July 1. Using effective interest method, what amount of the bond discount should be amortized for the six months ended December 31, 2019?

Reference no: EM132780611

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