Reference no: EM132545307

On January 1, 2019, Encrypt decided to lease ten identical items of equipment for an annual rental of P500,000 payable every yearend for six years. The lease provides that a purchase option of P400,000 exercisable at the end of the lease term. Encrypt, however, decides not to exercise this purchase option, thus, will give back the leased asset to the lessor, guaranteeing a residual value of P300,000 at the end of the lease term. The implicit interest rate for the lease as of the inception date is 9%.

• On January 1, 2021, Encrypt and the lessor decided to modify the terms of the lease agreement extending the lease for another four years. The guaranteed residual value was decreased by P50,000 to account for the additional wear-and-tear for the extended period. There were no change in the rate of annual rental but the implicit interest rate for the lease became 10% on this date.
• Due to financial problems faced by Encrypt, the lessor agreed that the lease shall only cover seven of the originally leased asset on January 1, 2022. Annual rentals and the guaranteed residual value decreased to P400,000 and P200,000, respectively. The implicit interest rate on the lease as of this date is 8%.
• Having been able to recover from its operating losses, Encrypt decided to leaseback three new pieces of the same equipment on January 1, 2023 for an annual rental of P120,000 for the remaining term of the extended lease agreement. It guaranteed a residual value of P150,000 for the additional scope of the lease. The implicit interest rate of the additional lease is 10%

Question 1. What are the items to be reported on each year's Balance Sheet?

Question 2. What are the items to be reported on each year's Income Statement?

Question 3. How much is the interest expense for 2019?

Question 4. How much is the interest expense for 2020?

Question 5. How much is the interest expense for 2021?

Question 6. How much is the interest expense for 2022?

Question 7. How much is the interest expense for 2023?

Question 8. How much is the depreciation expense for 2019?

Question 9. How much is the depreciation expense for 2020?

Question 10. How much is the depreciation expense for 2021?

Question 11. How much is the depreciation expense for 2022?

Question 12. How much is the depreciation expense for 2023?.

Question 13. How much is the carrying amount of the lease liability as of yearend 2019?

Question 14. How much is the carrying amount of the lease liability as of yearend 2020?

Question 15. How much is the carrying amount of the lease liability as of yearend 2021?

Question 16. How much is the carrying amount of the lease liability as of yearend 2022?

Question 17. How much is the carrying amount of the lease liability as of yearend 2023?

Question 18. How much is the carrying amount of the right of use asset as of yearend 2019?

Question 19. How much is the carrying amount of the right of use asset as of yearend 2020?

Question 20. How much is the carrying amount of the right of use asset as of yearend 2021?

Question 21. How much is the carrying amount of the right of use asset as of yearend 2022?

Question 22. How much is the carrying amount of the right of use asset as of yearend 2023?