a. P3,124,500 c. P120,000 18.

After the commencement date, the lease liability should be measured by the following except:
b. P2,326,950 d. P116,000
a. increasing the carrying amount to reflect interest on the lease liability.
c. P3,076,950
9. In computing depreciation of a right-of-use asset, the lessee should subtract b. reducing the carrying amount to reflect the lease payments made.
d. P2,297,550
c. remeasuring the carrying amount to reflect any reassessment or lease modifications, or to reflect
a. An unguaranteed residual value and depreciate over the life of the asset.
revised in-substance fixed lease payments.
46. On January 1, 2019, Yellow Company issued its P3,000,000, 8%, 5 -year bonds that resulted in a bond b. A guaranteed residual value and depreciate over the term of the lease.
d. cost model at cost less any accumulated depreciation and any accumulated impairment losses.
conversion privilege of P100,000. The bonds are convertible to 20,000 ordinary shares with a par value of c. An unguaranteed residual value and depreciate over the term of the lease.
P100 per share. On April 1, 2021, P1,200,000 bonds were converted to ordinary shares when the ordinary d. A guaranteed residual value and depreciate over the life of the asset. 19. Team, Inc. leased machinery with a fair value of P250,000 from Win Company on December 31, 2024. The
shares sell for P125 per share. The conversion of the bonds to ordinary shares shall result to a net contract is a six-year non-cancelable lease with an implicit rate of 10%. The lease requires an annual payment
10. Boyce Company leased a music studio from Justine company on a 6-year lease term at P250,000 annual
increase in share premium by: of P50,000 beginning December 31, 2024. Team, Inc.’s incremental borrowing rate is 12%.
rental payable in advance. Justine offered Boyce the option to purchase the asset at a bargain price of P200,000
a. P367,993 How much is the lease liability that Team, Inc. should report in its December 31, 2024 statement of
at the end of the lease contract. The estimated economic life of the asset is 10 years, and its estimated residual
b. P363,896 financial position? (use four decimal places PV factor)
value is P5,000. the interest implicit in the lease is 12%. At the end of the lease term, Boyce did not purchase
c. P327,993
the leased asset. a. P189,540
d. P323,896
How much loss on failure to exercise the bargain purchase option was reported by Boyce? P304,008 b. P200,000
c. P239,540
47. What is the effective rate of interest? Round off the PV factor to four decimal places, then do not round off during the computation
d. P230,240

20. BONUS

21. Lease payments are payments made by a lessee to a lessor relating to the right to use an underlying asset
during the lease term, comprising the following except:

11. Statement I: When the bargain purchase option was not exercised, the lessee should record a loss a. The exercise price of a purchase option if the lessee is reasonably certain to exercise that option
equivalent to the excess of the cost of the leased asset over the option price. b. Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option
Statement II: If there is a reasonable certainty that the lessee will obtain ownership by the end of the lease to terminate the lease
term, the leased asset should be depreciated the shorter between the lease term and the asset’s remaining c. Variable lease payments that depend on an index or a rate
useful life. d. Fixed payments (including in-substance fixed payments), add any lease incentives
a. 9.07% Statement III: Assuming the lessee depreciates the asset under the straight-line method, the pattern of the
22. In a case of low-value asset exemption, rent paid in advance by the lessee should be treated as
b. 8% total expense that the lessee shall recognized with respect to the lease is the same every period.Question
c. 8.82% a. prepaid expense
a. Only Statement I and II are incorrect.
d. 10% b. unearned income
b. Only Statement II and III are incorrect.
c. accrued expense
c. Only Statement I and III are incorrect.
48. TS Co. is in a financial trouble and is negotiating trouble debt restructuring with its creditors to relieve d. accrued asset
d. All statements are correct.
financial stress. TS Co. has a P5,000,000 notes payable to Metropolitan. The bank is considering acceptance e. All statements are incorrect. 23. Sputnik V Company grants Gamaleya Company first month rent-free under a 12-month lease for low-value
of equity interest in NKKLK Co. in the form of 400,000 ordinary shares with fair value of P12 per share. The items such as furniture, tablets, and laptops. The lease is effective April 01, 2024 and provides for a monthly
par value of ordinary share is P10 per share. If the issuance of equity is treated as a conversion of 12. In the long-term liabilities section of its statement of financial position on December 31, 2022, Bergify Co.
rental of P12,000, payment of which will begin on May 01, 2024.
existing debt, what is the amount of gain to be reported by TS Co in its profit or loss statement as a reported a lease liability of P75,000, net of current portion. Payments of P9,000 were made on both January 2,
result of restructuring? 2023, and January 2, 2024. Bergify 's incremental borrowing rate on the date of the lease was 11% and the
How much is the rent expense reported in Sputnik V Company’s profit or loss for the year ended
a. P1,000,000 lessor's implicit rate, which was known to Bergify, was 10%. In its December 31, 2023’s Statement of
December 31, 2024? P0
b. P200,000 Financial Position, what amount should Bergify report as lease liability, net of current portion?
c. P0 a. P73,500
d. P500,000 b. P74,250
c. P73,636
d. P66,000
24. Minimum lease payments are payments the lessee is obliged to make or can be expected to make in
connection with the leased property. In computing the minimum lease payments, all of the following would be
13. On January 01, 2024, Ethan Corporation signed a 5-year non-cancelable lease for a machine with Best included EXCEPT:
Company. The terms of the lease called for Ethan to make annual payments of P150,000 at the beginning of
a. Rental payments
each year starting January 01, 2024. The machine has an estimated useful life of 6 years and a P50,000
b. The present value of the cost of the leased asset
unguaranteed residual value at the end of the five-year lease term. The machine reverts to the lessor at the end
c. The penalty for failure to renew or extend the lease
of the five-year lease term. Ethan uses the straight-line method of depreciation for all of its plant assets.
d. Purchase option

Statement II. A lease liability includes he present value of fixed and variable lease payments plus lease c. Only A 46.The equal monthly rental payments made by the lessee, in a lease with a term of less than one year of a low-
incentive receivables. d. Neither A nor B value asset shall be

a. Statement I is true; Statement II is false. 37.On January 02, 2024, Bergify Co. entered into a 5-year lease contract for drilling equipment. Bergify a. Recorded partly as interest expense and partly a reduction of lease liability
b. Statement I is false; Statement II is true recorded the lease liability for P2,400,000, which includes a present value of P100,000 for the purchase option. b. Recorded as rent expense
c. Both statements are false. Bergify estimates that the fair value of the equipment at the end of its 8-year economic life will be P200,000. c. Recorded as interest expense and depreciation expense
d. Both statements are true. Bergify uses double-declining method of depreciating its assets. What amount should Bergify recognize as d. Recorded as reduction of lease liability
depreciation expense on the leased asset for 2024?
29. In the long-term liabilities section of its statement of financial position on December 31, 2022, Bergify Co. 47.On July 01, 2024, the Chicken Feet Corp., signs a 10-year non-cancelable lease agreement for a storage
reported a lease liability of P75,000, net of current portion. Payments of P9,000 were made on both January 2, a. P300,000 building owned by Helmet, Inc. The following information pertains to the lease agreement:
2023, and January 2, 2024. Bergify 's incremental borrowing rate on the date of the lease was 11% and the b. P480,000
Annual rental payment is P750,000 beginning July 01, 2024. The rental payment includes P50,000 for
lessor's implicit rate, which was known to Bergify, was 10%. c. P960,000
taxes and insurance.
In its December 31, 2023’s Statement of Financial Position, what amount should Bergify report as lease d. P600,000
liability, net of current portion? The fair value of the building on July 01, 2021 is P4,478,000.

a. P73,500 The building has an estimated economic life of 12 years. Unguaranteed residual value at the end of 10
b. P73,636 years is P150,000.
c. P74,250
Implicit rate is 12%.
d. P66,000
38.Donn Company acquires equipment under a non-cancelable lease at an annual rental of P45,000 payable in
advance for 5 years. Under the lease contract, Donn Company is given the option to purchase the asset for
Under IFRS 16, how much is the impact of the lease transaction to the income statement of Chicken Feet
P75,000 which is significantly lower than the expected market value of the asset at the end of 5 years. The
Corp. dated December 31, 2024?
appropriate interest rate is 12%.
30. Lease A does not contain a bargain purchase option, but the lease term is equal to 90 percent of the What is the capitalized cost of the asset and the 1st year’s interest expense? (use four decimal places PV NOTE: Round off your present value factor to 4 decimal places
estimated economic life of the leased property. Lease B does not transfer ownership of the property to the factor)
a. P408,357
lessee by the end of the lease term but gives the lessee option to purchase the leased asset at the end of the
a. P224,324 and P21,508 b. P495,271
lease term. The option price approximates the fair value of the asset at the end of the lease term. The lease
b. P204,771 and P21,508 c. P470,271
term is 5 years while the estimated useful life of the asset is 10 years. How should the lessor classify these
c. P204,771 and P19,173 d. P433,357
leases? [ Lease A ; Lease B ]
d. P224,324 and P26,908
a. Finance lease; Finance lease
b. Operating lease; Finance lease
c. Operating lease; Operating lease
48.On June 01, 2024, Sorn Company signed a 10-year non-cancelable lease for a machine requiring annual
d. Finance lease; Operating lease
39.On September 01, 2024, Fantastic Company leased furniture and fixtures from Gorgeous Company under a payments at the beginning of each lease year. The machine has a useful life of 15 years without salvage value.
31. What is the effect if the fair value of the underlying asset is lower than amount of the residual value one-year contract. The lease payments are as follows: First 6 months at P12,000 per month; next 6 months at Title passes to Sorn Company at the lease expiration date. Sorn Company’s accounting year ends on December
guarantee at the end of the lease term? P8,000 per month. How much is the rent expense for the year ended December 31, 2024? P40,000 31 and it uses straight-line method of depreciation for all of its property, plant and equipment, computed to
the nearest full month. Aggregate lease payments have a present value of P2,520,000 on June 01, 2024 based
a. The lessor shall pay the lessee the amount of the difference.
on an appropriate rate of interest.
b. The lessee does not have an obligation with respect to the residual value.
For the year 2024, what amount of depreciation expense should Sorn record for the leased machine?
c. The lessor shall recognize a loss on the lease transaction.
d. The lessee shall pay the lessor the amount of the difference. a. P147,000
b. P168,000
32. Sputnik V Company grants Gamaleya Company first month rent-free under a 12-month lease for low-value
c. P98,000
items such as furniture, tablets, and laptops. The lease is effective April 01, 2024 and provides for a monthly
40.The capitalized costs of Right-of-use Asset includes the following d. P252,000
rental of P12,000, payment of which will begin on May 01, 2024.
I. Present value of the lease payments at the inception of the lease
II. Present value of guaranteed residual value
What is the amount reported in Gamaleya Company’s statement of financial position at December 31,
III. Present value of purchase option
2024?
IV. Initial direct costs incurred by the lessee
a. Rent payable of P3,000 V. Executory costs
b. Unearned rent of P3,000
a. I, II, III, and IV
c. Rent receivable of P3,000 ACCO 209 (2024) _Quiz 4 - Leases (Lessor's Point of View) and Leaseback
b. I, II, and IV
d. Prepaid rent of P3,000
c. I, II, IV, and V

41.In accordance with PFRS 16, what is the measurement of a right of use (ROU) asset acquired under a lease?

3.Data for Nos. 3 to 6 c. Recognized over the period of the lease using the interest method c. Recognized over the period of the lease using the interest method
d. Recognized over the period of the lease using the straight line method d. Recognized over the period of the lease using the straight line method
On December 31, 2024, Beam Company leased equipment to Forth Company for a four-year period ending
19.Integrity Company uses leases as a means of selling equipment. On July 1, 2021, the company leased a 19.Integrity Company uses leases as a means of selling equipment. On July 1, 2021, the company leased a
December 31, 2028. The equipment cost Beam Company P365,760 and has an expected useful life of five years.
machine to a lessee. The cost of the machine to Integrity was P784,500. Annual lease payments are P135,000 machine to a lessee. The cost of the machine to Integrity was P784,500. Annual lease payments are P135,000
Its normal sales price is P365,760. The lessee guarantees the residual value of P80,000. Lease payment is due
and are payable in advance for 12 years. The residual value of the machine at the end of the lease term is and are payable in advance for 12 years. The residual value of the machine at the end of the lease term is
every December 31 and Forth Company made the first payment on December 31, 2024. Beam Company’s
P100,000 which is not guaranteed by the lessee. The lessor’s implicit interest rate is 10%. How much is the P100,000 which is not guaranteed by the lessee. The lessor’s implicit interest rate is 10%. How much is the
implicit interest rate is 10%.
Cost of Sales to be reported by Integrity in 2021? (Round off the PV factor to four decimal places, then do Cost of Sales to be reported by Integrity in 2021? (Round off the PV factor to four decimal places, then do
How much is the annual lease payment?
not round off during the computation) P752,640 not round off during the computation) P752,640
a. 104,892
b. 89,223
c. 81,950
d. 91,550

4.Before the first payment on December 31, 2024, how much is the gross investment in the lease?

a. 356,892
b. 365,892 20.If the residual value of a leased asset is guaranteed by a third party, 20.If the residual value of a leased asset is guaranteed by a third party,
c. 463,892
a. The third party is also liable for any lease payments not paid by lessee a. The third party is also liable for any lease payments not paid by lessee
d. 436,892
b. It is treated by the lessee as an unguaranteed residual value but by the lessor as a guaranteed residual. b. It is treated by the lessee as an unguaranteed residual value but by the lessor as a guaranteed residual.
c. It is treated by the lessor as an unguaranteed residual value. c. It is treated by the lessor as an unguaranteed residual value.
d. The net investment to be recovered by the lessor is reduced. d. The net investment to be recovered by the lessor is reduced.
5.How much is the net investment in the lease at December 31, 2024?
21.A lessor with a sales-type lease involving an unguaranteed residual value available to the lessor at the end of 21.A lessor with a sales-type lease involving an unguaranteed residual value available to the lessor at the end of
a. 313,113
the lease term will report sales revenue in the period of inception of the lease at which of the following the lease term will report sales revenue in the period of inception of the lease at which of the following
b. 304,191
amounts? amounts?
c. 214,968
d. 276,537 a. The cost of the asset to the lessor, less the present value of any unguaranteed residual value. a. The cost of the asset to the lessor, less the present value of any unguaranteed residual value.
b. The present value of the minimum lease payments plus the present value of the unguaranteed residual b. The present value of the minimum lease payments plus the present value of the unguaranteed residual
value. value.
6.If the residual value is not guaranteed, how much is the net investment in the lease shall be recognized c. The present value of the minimum lease payments. c. The present value of the minimum lease payments.
on December 31, 2024? d. The minimum lease payments plus the unguaranteed residual value. d. The minimum lease payments plus the unguaranteed residual value.

a. 311,120 22.Integrity Company leased a machine to a lessee for six years requiring payments of P100,000 at the 22.Integrity Company leased a machine to a lessee for six years requiring payments of P100,000 at the
b. 356,760 beginning of each lease year on August 1, 2021. The machine cost P470,000, which is the fair value at the beginning of each lease year on August 1, 2021. The machine cost P470,000, which is the fair value at the
c. 365,760 inception of the lease. Integrity has the option to purchase the machine for P5,000 which is significantly lower inception of the lease. Integrity has the option to purchase the machine for P5,000 which is significantly lower
d. 311,210 than the expected fair value of the machine at lease expiration date. Integrity incurred an initial direct cost of than the expected fair value of the machine at lease expiration date. Integrity incurred an initial direct cost of
P3,000. The interest rate implicit in the lease is 10%. Integrity appropriately recorded the lease as a direct P3,000. The interest rate implicit in the lease is 10%. Integrity appropriately recorded the lease as a direct
7.On August 01, 2024, PAC Aviation leased two helicopters from Fast Aircraft for an initial period of 12 months
financing lease. How much is the Net Finance Lease Receivable at December 31, 2021? (Round off the PV financing lease. How much is the Net Finance Lease Receivable at December 31, 2021? (Round off the PV
with a provision for a continuation of a month-to-month basis. The lease is properly classified as an operating
factor to four decimal places, then do not round off during the computation) factor to four decimal places, then do not round off during the computation)
lease. Lease payments are to be made as follows:
• 1st two months - P15,000 per month a. P385,417 a. P385,417
• Next three months - P12,000 per month b. P310,300 b. P310,300
• Next three months - P10,000 per month c. P388,542 c. P388,542
• Last four months - P7,500 per month d. P410,300 d. P410,300

After the first year, the rent continues at P6,000 per month.
What are the amounts reported in PAC Aviation’s financial statements for the year 2024? 23.Which of the following lease-related revenue and expense items would be recorded by the lessor if the lease 23.Which of the following lease-related revenue and expense items would be recorded by the lessor if the lease
is accounted for as an operating lease? is accounted for as an operating lease?
a. Rent revenue of P66,000 and Unearned rent of P13,500
b. Rent revenue of P66,000 and Rent receivable of P13,500 a. Depreciation Expense a. Depreciation Expense
c. Rent revenue of P52,500 and Unearned rent of P13,500 b. Rental Revenue and Depreciation Expense b. Rental Revenue and Depreciation Expense
d. Rent revenue of P52,500 and Rent receivable of P13,500 c. Interest Income c. Interest Income
d. Rental Revenue d. Rental Revenue