Tugap, Tiffany

Acc 211 ULO A-C

In A Nutshell

Ramzel Company

Question 1

Initial Lease Liability (600,000 x 2.67 ) P 1,602,000

Question 2

Fair Value 6,000,000

Sale Price` 4,800,000
Excess fair value 1,200,000

Initial Lease Liability 1,602,000

Excess Fair value 1,200,000
Total Lease Liability P 402,000

Cost of right of use asset (P 402,000 / 6,000,000 x 4,200,000) P 281,400

Question 3

Fair Value 6,000,000

Carrying Amount 4,200,000
Total Gain P 1,800,000

fair Value 6,000,000

Right retained by Seller- lease 402,000
Right transferred to buyer-lessor P 5,598,000

Gain to be recognized (5,598,000 / 6,000,000 x 1.8)P 1,679,400

Question 4

Book of seller-lessee

a. Cash 7,200,000
Right of use asset 281,400

Machinery 4,200,000
Lease liability 1,602,000
Gain on right transferred 1,679,400

b. Internet expense (6% x 1,602,000) 96,120

Lease liability 503,880
Cash 600,000

c. Depreciation (4,200,000/3) 1,400,000

Accumulated depreciation 1,400,000

Books of buyer-lessor

a. Machinery 4,800,000
Cash 4,800,000

b. Cash 600,000
Rental income 600,000

c. Depreciation (4,800,000/10) 480,000

Accumulated depreciation 480,000