NEATNESS COUNTS = 3 points.
Data for nos. 1-3: Impress Inc. leased office from Prime Property Inc. on Oct. 1, 2011 under a 4-year contract that specified rentals payable as follows: for the first lease year, P250,000 annual rent and an annual increase of 10% of the rent from the 2nd to the 4th lease years. The contract also specifies that rent due is payable at the end of each month. All payments were promptly made.
1. What amount of rent income should the lessor recognize for the year ended Dec. 31, 2011?
2. What is the balance of rent payable in the books of the lessee at Dec. 31, 2013?
3. Assuming the lessee makes only one entry at the end of 2012 to record rent expense incurred and rent payments made for the whole year, what should have been that entry?
Data for nos. 4-11: Agile Corp. entered into a 5-year operating lease agreement with Pert Co. on July 1, 2012 that specifies the following terms:
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The leased site is a newly constructed building costing P4,000,000 (estimated life, 20 years; 10% residual value), was ready for occupancy on Mar. 31, 2012. Insurance of P30,000 and repairs and maintenance costs of P24,000 are incurred annually in relation to the leased site. To negotiate the lease with Agile, Pert Co. paid broker’s commission and other leasing contract fees totaling P40,000.
4. Give the entry in the lessee’s books to record the payment made on July 1, 2012, assuming the asset method was used to record the payment and give the adjusting entry needed on Dec. 31, 2012 so the lessee’s books show the correct account balances.
5. What amount of net rent income should the lessor recognize for the year ended Dec. 31, 2012?
In the lessee’s statement of financial position on Dec. 31, 2012, what amounts should be reported under (itemize, show proper captions and total)
6. Current assets
7. Noncurrent assets
8. Current liabilities
9. In the lessor’s income statement for the year ended Dec. 31, 2012, itemize the accounts and amounts that should be reported in relation to the lease.
In the lessor’s statement of financial position on Dec. 31, 2013, what amounts should be reported under (itemize, show proper captions and total)
10. Current assets
11. Noncurrent assets
Data for nos. 12-13: The Burger Shop leased a store site from The Mall Inc. on July 1, 2011. The 3-year operating lease requires the following payments to be made at the start of the contract: a fixed monthly rent of P6,000, payable 1 year in advance; insurance and maintenance charges totaling P18,000 per year; and a security deposit equivalent to 6 months’ fixed monthly rent. The lessee must also pay contingent rent amounting to 5% of its gross annual sales in excess of P1 million. The contingent rent is payable 15 days after the end of the lessee’s fiscal year. The lessee’s fiscal year ends on June 30. For the year ended June 30, 2012 and 2013, the lessee’s gross annual sales are P870,000 and P1,200,000.
12. Give the entries in the books of the lessee for the years ended June 30, 2012 and June 30, 2013.
13. Give the entries in the books of the lessor for the year ended June 30, 2012.