OPERATING LEASE - LESSEE On January 1, 2020, Glenn Company

Problem 1 Signed a 10-year operating lease for office

On December 1, 2020, Lloyd Company
leased office space for five years at a
monthly rental of P600,000. On the same
date, the entity paid the lessor the
following amount:
Bonus to obtain lease
First month’s rent
Last month’s rent
Security deposit refundable at lease
expiration
Installation of new walls and offices
What total amount of the expenses
relating to utilization of the office space
should be reported for 2020?
space at P960,000 per year.
The lease included a provision for
additional rent of 5% annual company
sales in excess of P5,000,000.
The sales for the year ended December
31, 2020 total P6,000,000
Upon execution of the lease, the entity
paid P240,000 as a bonus for the lease.
What is the rent expense for the year
ended December 31, 2020?
Answer: 1,034,000

Answer : 665,000

Problem 2
Problem 4
On July 1, 2020, Melvin Company leased
office space for 5 years at P150,000 a Lester Company leases and operates a
month, On that date the entity paid the retail store. The following information
lessor the following relates to the lease for the current year:
I. The store lease, an operating
Rent security deposit lease, calls for the lease
II. Additional rent is computed at
350,000 6% of net sales over P3,000,000 up to
First month’s rent P6,000,000 and 5% of net sales
over P6,000,000, per calendar year.
150,000 III. Net sales for the current year
Last month’s rent amount to P9,000,000.
IV. The entity paid executory costs
150,000 to the lessor for property taxes of
Nonrefundable reimbursement to lessor P120,000 and insurance of
for modification to the leased premises P50,000
900,000
What total amount of the expense should
What portion of payments to the lessor be reported for the year?
should be deferred on December 31,
2020? Answer: 680,000

Answer: 1,310,000 Problem 5 - Lease free

Problem 3 As an inducement to enter a lease, Eris

Company, a lessor, granted Topson
Company, a lessee, nine months of free
rent under a 5 year operating lease.
The lease was effective on July 1, 2020
and provided for monthly rental of
P100,000 to begin April 1, 2021.
On July 1, 2016, Peter Company leased
office premises for a three-year period at
an annual rental of P360,000 payable on
July 1 each year. The first rent payment
was made July 1, 2016

In the income statement for the year
ended June 30, 2021 what amount should
be reported as rent expense.
Answer: 1,020,000
Problem 6
Additionally on July 1, 2016, the entity
paid P240,000 as a lease bonus to obtain
a three year lease instead of the lessor’s
unusual term of six years
On December 31, 2016, what amount
should be reported a prepaid rent?

Sky Company leased a building for 20 Answer: 380,000

years with effect from January 1, 2016.
The useful life of the building is 40 years.
As part of the negotiations for the lease,
the lessor granted Sky a rent- free period.
Annual rentals of P1,600,000 are payable
in advance on January 1, commencing
2018.
What amount of rent expense should be
recognized for the year ended December
31, 2016
Problem 9
As an incentive to enter a four-year
operating lease for a warehouse,
Francheska Company received an upfront
cash of P60,000 upon signing an
agreement at the beginning of current
year. The annual rental is P1,115,000
What amount should be recognized as
lease expense for the current year?

Answer: 1,440,000 Answer: 1,100,000

Problem 7

On October 1, 2016 Pammy Company

leased office space at a monthly rental of
P300,000 for 10 years expiring September
30, 2026

As an inducement for Pammy to enter

into the lease, the lessor permitted
Pammy to occupy the premises rent-free.
October 1 to December 31, 2016

For the year ended December 31, 2016,

what amount should be reported as rent
expense

Answer: 877,500

Problem 8