Applied Auditing Leases MC Questions

MULTIPLE CHOICE
13. On January 1, 2019, Mayumi Corporation, lessor, entered into a four-year operating lease.
The payments were as follows: P 20,000 for 2019, P 18,000 for 2020, P16,000 for 2021, and P
14,000 for 2022. What is the correct amount of rent income for 2021?
a.20,500
b.19,000
c.17000
d.18000
14. On July 1, 2019, Enet Company leased a delivery truck from Ylan Corporation under a 3-
year operating lease. Total rent for the term of the lease will be P 360,000, payable as follows:
12 months at P 5,000 =P 60,000
12 months at P 7,500 =90,000
12 months at P 17,500 =210,000
All payments were made when due. In Ylan’s June 30,2021, statement of financial position, the
accrued rent receivables should be reported at:
a.P90,000
b.P210,000
c.P120,000
d.Nil
15. On January 1, 2021, Jude Co., lessor, entered into a 3-year nonrenewable operating lease,
commencing on that date, for office space. The office space has a useful life of 50 years. The
lease specifies a monthly rent of P 25,000.
Questions: Assume the following independent case:
Case no. 1: Assume that no other data are given
How much is the total rent income in 2021?
a.P320,000
b.P300,000
c.P360,000
d.P250,000
16. Case no. 2: Assume instead that the lessee Co. made the following payments on January 1,
2021:
Bonus obtain to lease P 180,000
One year’s rent 300,000
Last month’s rent 25,000
a.P480,000
b.P505,000
c.P360,000
d.P300,000
17. Case no. 3: Assume instead that the Jude Co. grants free rent of 6 months to the lessee
a.P320,000
b.P300,000
c.P360,000
d.P250,000
18. How much is the rent receivable (or unearned rent income) on December 31, 2021?
a.Nil
b.(P50,000)
c.(P40,000)
d.P100,000
19. Case no. 4: Assume instead the rent payment will be as follows:
Rent per month for the 1st two years P 25,000
Rent per month for the last year 30,000
a.P320,000
b.P300,000
c.P360,000
d.P250,000
20. How much is the rent receivable (or unearned rent income) on December 31, 2021?
a.Nil
b.(P50,000)
c.(P40,000)
d.(P20,000)
21. Case no. 5: Assume instead that the Jude Co. incurred the following:
Initial Direct Cost P 120,000
Insurance and property tax expense on leased asset 40,000
Depreciation of the leased asset 30,000
How much is the net income to be recognized as a result of this lease in 2021?
a.P190,000
b.P300,000
c.P110,000
d.P230,000
22. Case No.6: Assume that in addition to the monthly rent, the lessor and lessee agreed on the
following additional rent:
Rate Net Sales Over Up to
10% 1,500,000 2,500,000
8% 2,500,000
The total Net Sales for 2021 were 6,000,000.
How much is the total income in 2021?
a.P680,000
b.P400,000
c.P580,000
d.P300,000
23. On December 31, 2021, Take it Easy Co. leased an equipment with a cost of P 1,000,000 to
Desperado Co. for 4 years which is also the useful life of the asset. The lease agreement
specifies equal annual payment of P 261,694 beginning on December 31, 2021.
At the end of the lease term, the equipment will revert to Take it Easy Co. A third party related to
the lessee guarantees residual value of the equipment amounting to P 150,000. The rate implicit
on the lease is 11%.
Questions: Based on the above data, answer the following:
How much is the total interest income to be earned over the lease term?
a.P46,775
b.P103,225
c.P196,775
d.P1,172,927
24. How much is the interest income in 2022?
a.P24,597
b.P61,361
c.P81,214
d.P110,000
25. How much is the leased-related asset to be shown as a current in the statement of financial
position?
a.P180,480
b.P557,826
c.P738,306
d.P1,000,000
26. On December 31, 2021, Dire Straits Co. leased an equipment with a cost of P 900,000 to
Sultans of Swing Co. for 4 years which is also the useful life of the asset. The lease agreement
specifies equal annual payment of P 251,600 beginning on December 31, 2021. On the same
date, Dire Straits Co. paid P 24,128 incremental costs that are directly attributable to negotiating
and arranging a lease.
At the end of the lease term, the equipment will revert to Dire Straits Co. The rate implicit on the
lease is 8% but after considering the initial direct cost the implicit rate is adjusted at 6%.
a.P82,273
b.P106,402
c.P162,795
d.P186,924
27. How much is the total interest income in 2022?
a.P51,872
b.P72,000
c.P35,894
d.P40,352
28. How much is the leased-related asset to be shown as a current in the statement of financial
position?
a.P648,400
b.P199,728
c.P448,671
d.P211,248
29. On January 1, 2021, Money Co., a dealer of machines, leased a machine to For Nothing Co.
Data relating to the lease is as follows:
Cost of machinery P 900,000
Useful life of equipment 5
Lease term 4
Annual rent payable at the end of the year 300,000
Interest rate implicit in the year 8%
Residual value 50,000
Initial direct cost 10,000
The leased asset reverts to Money Co., at the end of the lease term. The lease is appropriately
recorded as sales type lease.
a.P219,620
b.P1,250,000
c.P993,630
d.P36,750
30. How much is the total interest income in 2021?
a.P65,075
b.P82,430
c.P46,227
d.P100,000
31. How much is the profit on sale on December 31, 2021?
a.Nil
b.P 120,380
c.167,130
d.83,630
32. Assuming the residual value decrease by P 6,000, how much is the loss to be recognized in
profit or loss at the end of the lease?
a.Nil
b.P 6,000
c.P 300,032
d.P 50,000

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MULTIPLE CHOICE

12 months at P 5,000 =P 60,000

12 months at P 7,500 =90,000

12 months at P 17,500 =210,000

Questions: Assume the following independent case:

Case no. 1: Assume that no other data are given

How much is the total rent income in 2021?

Bonus obtain to lease P 180,000

One year’s rent 300,000

Last month’s rent 25,000

How much is the total rent income in 2021?

How much is the total rent income in 2021?

Rent per month for the 1st two years P 25,000

Rent per month for the last year 30,000

How much is the total rent income in 2021?

Initial Direct Cost P 120,000

Insurance and property tax expense on leased asset 40,000

Depreciation of the leased asset 30,000

10% 1,500,000 2,500,000

The total Net Sales for 2021 were 6,000,000.

How much is the total income in 2021?

Questions: Based on the above data, answer the following:

24. How much is the interest income in 2022?

Questions: Based on the above data, answer the following:

27. How much is the total interest income in 2022?

Cost of machinery P 900,000

Useful life of equipment 5

Annual rent payable at the end of the year 300,000

Interest rate implicit in the year 8%

Residual value 50,000

Initial direct cost 10,000

Questions: Based on the above data, answer the following:

30. How much is the total interest income in 2021?

31. How much is the profit on sale on December 31, 2021?

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