On July 1,2020, the Prince of Wales, Inc. signs a 10-year non-cancellable lease agreement for a storage building owned by Colony, Inc.The following information pertains to the lease agreement. •...

On July 1,2020, the Prince of Wales, Inc. signs a 10-year non-cancellable lease agreement for a storage building
owned by Colony, Inc.The following information pertains to the lease agreement.
• Annual rental payment is P 750,000 beginning on July 1,2020. This rental payment includes P 50,000 for taxes and
insurance.
• The fair value of the building on July 1,2020 is P 4,478,000.
• The building has an estimated useful life of 12 years. Unguaranteed residual value at the end of 10 years is P
150,000.
• Interest rate implicit on the lease is 10%.
REQUIRED:
a.) At what amount should Prince of Wales record the building on July 1,2020?
b.) What is the annual depreciation on the building?
d.) Prepare the entries in the books of Prince of Wales to record the foregoing for the years 2020 and 2021. The
company adopts the calendar year as its reporting period.