FIRST PROBLEM:

On January 1, 2023, CLEMENTE Company entered into a five-year lease contract covering an office space. Annual lease payments of P900,000 are due every January 1 of each year. The lease contract allows the company to extend the lease term for an additional 3 years. The incremental borrowing rate is 7%. As of the commencement date, the company assessed that it is not reasonably certain that it will exercise the extension option. However, on January 1, 2024, after the lease payment for that year, the company reassessed that it would now exercise the extension option. The incremental borrowing rate as of this date is 9%.

Requirement: Prepare the amortization schedule on January 1, 2024.

SECOND PROBLEM:

On January 1, 2023, Jacinto Company entered into a four-year lease contract involving a vehicle, where annual payments of P600,000 are due every January 1 starting on that date. In addition, the company has the option to extend the lease term for an additional 3 years, which was reasonably expected to be exercised. The incremental borrowing rate is 8%. However, on January 1, 2025, the company reassessed that it would not exercise the extension option since it decided to look instead for a more updated version of the vehicle at the end of the lease term. The incremental borrowing rate as of this date is 6%.

Requirement: Prepare the amortization schedule on January 1, 2025.