Reference no: EM133184673

Question 1 - At the beginning of current year, Megaworld Company leased a new machine to BDO Company for 5 years. The annual rental is P900,000. Additionally, BDO paid P500,000 to Megaworld as a lease bonus and P250,000 as a security deposit to be refunded upon expiration of the lease. What amount should be reported as rent revenue for the current year?

Question 2 - On January 1, 2021 Kawasaki Company purchased a new machine for P4,800,000 and leased it to Motorcade Company the same day. The machine has an estimated useful life of 12 years and will be depreciated by the straight line method. The lease is for a three year period expiring January 1, 2024 at an annual rental of P850,000. Additionally, Motorcade Company paid P300,000 to Kawasaki as a lease bonus to obtain the three-year lease. During 2021, Kawasaki paid insurance of P80,000 for the leased machine. Prepare journal entries on the books of the lessor for the year ended December 31, 2021.