a. Prepare the relevant journal entries in the first year of the lease. b. Prepare the relevant financial statement extracts in the first year of the lease
a. Prepare the relevant journal entries in the first year of the lease. b. Prepare the relevant financial statement extracts in the first year of the lease
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Magnitude Ltd acquired an item of plant under a three-year lease on January 1, 2019. The remaining useful life of the plant is seven years and there are no transfer of the asset and no purchase option at the end of the lease. The rental payments are $10,000,000 per annum payable in arrears for the three years on December 31 each year and the company incurs initial direct costs of $20,000 and receives lease incentives of $16,000. The interest rate implicit in the lease is 8% per annum.
Required:
a. Prepare the relevant journal entries in the first year of the lease.
b. Prepare the relevant financial statement extracts in the first year of the lease
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