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1.Kew Company leases and operates a retail store.

The following
information relates to the lease for the current year: • The store lease, an
operating lease, calls for a base monthly rent of P15,000 on the first day of
each month. • Additional rent is computed at 6% of net sales over
P3,000,00 up to P6,000,000 and 5% of net sales over P6,000,000, per
calendar year. • Net sales for the current year amounted to P9,000,000. •
The entity paid executory costs to the lessor for property taxes of P120.000
and insurance of P50,000. What total amount of the expenses should be
reported in income statement for the year?. Single line text.
(2 Points)

2.Neal Company entered into a nine-year finance lease on a warehouse on


December 31, 2019. Lease payment of P520,000 which includes real estate
taxes and other executory cost of P20,000, are due annually, beginning on
December 31, 2020 and every December 31 thereafter. The interest rate
implicit in the lease is 9%. The rounded present value of an ordinary
annuity of I for nine years at 9% is 5.6. What amount should be reported as
lease liability on December 31, 2019?. Single line text.
(2 Points)

3.On December 1, 2019, Tell 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 amounts: Bonus to obtain lease 300,000 First month's rent
600,000 Last month's rent 600,000 Security deposit refundable at lease
expiration 800,000 Installation of new walls and offices 3,600,000 What
total amount lease expenses relating to utilization of office space should
be reported for 2019?. Single line text.
(2 Points)

4.Hutch Company leased equipment to Elder Company on July 1, 2019 for


a one-year period expiring June 30, 2020 for P60,000 a month. On July 1,
2020, Hutch leased this piece of equipment to ToI Company for a three-
year period expiring June 30, 2023 for P75,000 a month. The original cost
of the equipment was P4,800,000. The equipment which has been
continually on lease since July 1, 2009 is being depreciated on a straight
line basis over an eight-year period with no residual value. Both the lease
to Elder and the lease to Toil are appropriately recorded as operating lease.
What is the amount of net rental income that would be reported by Hutch
Company for the year ended December 31, 2020?. Single line text.
(2 Points)

5.On January 1, 2019, Glen Company leased a building to Dix Company for
a ten-year term at an initial rental of P500,000. At inception of the lease,
Glen received P2,000,000 covering the first two years' rent of P1,000.000
and a security deposit of P1,000,000. This deposit will not be returned to
Dix upon expiration of the lease but will be applied to payment of rent for
the last two years of the lease. What portion of the P2,000,000 should be
reported as current liability?. Single line text.
(2 Points)

6.Oak Company leased equipment for the entire nine-year useful life,
agreeing to pay P500,000 at the start of the lease term on December 31,
2019, and P500,000 annually on each December 31 for the next eight years.
The present value on December 31, 2019 of the nine lease payments over
the lease term using the rate implicit in the lease which Oak know; to
be.10% was P3,165,000. The December 31, 2019 present value of the lease
payments using Oak's incremental borrowing rate of 12% was P2,985,000.
Oak made a timely second lease payment. What amount should be
reported as lease liability on December 31, 2020. Single line text.
(2 Points)

7.On January 1, 2019, Babson Company leased two automobiles for


executive use. The lease requires Babson to make five annual payments of
P1,300,000 beginning January 1, 2019. At the end of the lease term,
December 31, 2023, the entity guaranteed the residual value of the
automobiles at P1,000,000. The lease qualifies as a finance lease. The
interest rate implicit in the lease is 9%. Present value factors for the 9% rate
implicit in the lease are as follows: For an annuity due with 5 payments (in
advance) 4.240 For an ordinary annuity with 5 payments 3.890 Present
value of 1 for 5 periods 0.650 What is the finance lease liability immediately
after the first required payment?. Single line text.
(2 Points)
8.On December 31, 2019, Roe Company leased a machine from Colt for a
five-year period. Equal annual payments under the lease are P1,050,000
including P50,000 annual executory cost and are due on December 31 of
each year. The first payment was made on December 31, 2019, and the
second payment was made on December 31,2020. The five lease payments
are discounted at 10% over the lease term. The present value of minimum
lease payments at the inception of the lease and before the first annual
payment was P4,110,000. The lease is appropriately accounted for as a
finance lease. On December 31, 2020. what amount should be reported as
lease liability?. Single line text.
(2 Points)

9.Rapp Company leased a new machine to Lake Company on January 1,


2019. The lease expires on January 1, 2025. The annual rental is P900,000.
Additionally, on January 1, 2020, Lake paid P500,000 to Rapp as a lease
bonus and P250,000 as a security deposit to be refunded upon expiration
of the lease. What amount of rental revenue should be reported for 2020?.
Single line text.
(2 Points)

10.On January 1, 2019, All-in Company entered into a ten-year non-


cancelable lease requiring year-end payments of P2,000,000. All-in’s
incremental borrowing rate is 10%, while the lessor’s implicit interest rate,
known to All-in, is 12%. Present value factors for an ordinary annuity for
ten periods are 6.145 at 10%, and 5.650 at 12%. On same date, All-in
Company paid initial direct cost of P300,000 in negotiating and securing
the leasing arrangement. Ownership of the property remains with the
lessor at expiration of the lease. The leased property has an estimated
economic life of 12 years. What amount should be capitalized initially as
cost of the right-of-use asset?. Single line text.
(3 Points)

11.On January 1, 2019. Day Company catered into a 10-year lease


agreement with Ward Company. for industrial equipment. Annual lease
payments of P1,000,000 are payable at the end of each year The entity
knows that the lessor expects a 10% return on the lease which-is the
implicit rate in the lease. The equipment is expected to have an estimated
useful lift of 10 years. In addition, a third party has guaranteed to pay Ward
a residual value of P500,000 at the end of the lease. Present value of an
ordinary annuity of t at 10% for 10 periods 6.14 Present value of 1 at 10%
for 10 periods 0.39 On December 31, 2019, what is the amount of right-of-
use assets?. Single line text.
(2 Points)

12.On July 1, 2019. Walton Company leased office premises for a three-
year period at an annual rental of P360,000 payable on July each year. The
first rent payment was made July 1, 2019. Additionally on July 1, 2019. the
entity paid P240,000 as a lease bonus to obtain a three-year lease instead
of the lessor's usual term of six years. On December 31, 2020, what amount
should be reported as rent payable?. Single line text.
(2 Points)

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