On january 1 2014 slaine company signed a one year

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On January 1, 2014, SLAINE COMPANY signed a one-year rental for a total of P1,200,000, with monthly payments of P100,000 due at the end of each month. In addition, the lessee must pay contingent rent of 5% of all sales in excess of P30,000,000. The contingent rent is payable on December 31, 2014. On January 31, SLAINE COMPANY received the first rental payment. At that time, sales for the lessee had reached P3,000,000. The same lessee has used the building for the past 5 years, and in each of those years, the lessee reached the contingent rent threshold of P30,000,000 in sales. Accordingly, the accountant of SLAINE recognized total rent revenue of P125,000 for January – P100,000 collected in cash and another P25,000 in estimated contingent rent. The contingent rent estimate was based on the excess of sales in January over one month of the P30,000,000 threshold. Sales for February were P2.800,000 and the accountant of SLAINE followed the same procedure regarding the contingent rent. Sales for March were P3,500,000. However in March, the accountant of SLAINE learned that the contingent rentals should not be estimated, but instead should be recognized only after the threshold has been reached. The accounting was done correctly in March, and the appropriate entry was made to correct the mistakes made in January and February. Sales by the lessee for the year ended December 31, 2014, totaled P39,900,000.
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  • Fall '17
  • Gutierrez
  • 1966, 1981, 1973, 1970, 1977, 1983

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