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What is the minimum annual lease payment

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Question - The agreement required equal rental payments at the end of each year. The fair value of the building is P3,075,000. However, the carrying amount of the building is P2,460,000. The building has an estimated economic life of 10 years with no residual value. At the termination of the lease, the title to the building will be transferred to the lessee. Yolk Company set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by the lessee. The annual total lease payment included P100,000 of executory cost related to taxes on the property. The present value of an ordinary annuity of 1 at 10% for 10 periods is 6.15.

a. What is the minimum annual lease payment?

b. What is the total annual lease payment?

Reference no: EM133087966

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