Commencement Date: Jan.

1, 2020 Estimated life of the building (years) 20

Annual Payment payable
Implicit Interest Rate:
at the end of each year: 600,000 9%
PV of an ordinary annuity of 1 at 9% for
Lease term (years) 5 5 periods: 3.89

TABLE OF AMORTIZATION
Date Payment Interest Principal Present Value
1/1/2020 2,334,000
12/31/2020 600,000 210,060 389,940 1,944,060
12/31/2021 600,000 174,965 425,035 1,519,025
12/31/2022 600,000 136,712 463,288 1,055,737
Journal Entries for 2020

DATE ACCOUNT TITLE Debit Credit

1-Jan-20 Right of Use Asset 2,334,000
Lease Liability 2,334,000

31-Dec-20 Interest Expense 210,060

Lease Liability 389,940
Cash 600,000

31-Dec-20 Depreciation 466,800

Accumulated Depreciation 466,800
Remeasurement of Lease Liability
On January 1, 2023, the lease liability is remeasured using the new interest implicit interest rate of 9%.
Annual rent for remaining 2 years of old lease term
Multiplied by PV of an ordinary annuity of 1 at 9% for 2 periods
Present Value - January 1, 2023

Annual rental for 5 years starting January 1, 2025

Multiplied by PV of an ordinary annuity for 5 periods
Present Value - January 1, 2025
Multiplied by PV of 1 at 12% for 2 periods
Present Value - January 1, 2025

The present value of the new rentals on January 1, 2026 is rediscounted for 2 periods on the date of
extension on January 1, 2023
Present value of remaining rentals of old lease term ₱ 1,014,000
Present value of rentals of extended lease term
Total present value - January 1, 2023
Present value - December 31, 2022
Increase in lease liability on January 1, 2023

Right of use asset - January 1, 2020 ₱ 2,334,000

Accumulated depreciation - December 31, 2022
Carrying amount - December 31, 2022 ₱ 933,600
Increase in lease liability on January 1, 2023
New carrying amount
plicit interest rate of 9%.
₱ 600,000
1.69
₱ 1,014,000

₱ 800,000
3.605
₱ 2,884,000
0.797
₱ 2,298,548

periods on the date of

₱ 1,014,000
2,298,548
₱ 3,312,548
1,055,737
₱ 2,256,811

₱ 2,334,000
1,400,000
₱ 933,600
2,256,811
₱ 3,190,411
New Annual Payment
payable at the end of each 800,000 PV of 1 at 12% for 2 periods: 0.797
year:
PV of an ordinary annuity of 1 at
Implicit Interest Rate: 12% 1.69
12% for 2 periods:
PV of an ordinary annuity of 1
3.605
at 12% for 5 periods:

TABLE OF AMORTIZATION
Date Payment Interest Principal Present Value
1/1/2023 3,312,548
12/31/2023 600,000 397,506 202,494 3,110,054
12/31/2024 600,000 373,206 226,794 2,883,260
12/31/2025 600,000 345,991 454,009 2,429,251
12/31/2026 600,000 291,510 508,490 1,920,761
12/31/2027 600,000 230,491 569,509 1,365,252
12/31/2028 600,000 162,150 637,850 713,402
12/31/2029 600,000 86,598 713,402 -
Journal Entries for 2023

DATE ACCOUNT TITLE Debit Credit

1-Jan-23 Right of Use Asset 2,256,811
Lease Liability 2,256,811

31-Dec-23 Interest Expense 397,506

Lease Liability 202,494
Cash 600,000

31-Dec-23 Depreciation 455,773

Accumulated Depreciation 455,773