ABC Ltd executes a five-year lease agreement with Legal Ltd for a piece of machinery on July I, 2023. At the end of the fifth year, ABC Ltd will be willing to execute a bargain purchase option for $90,000. The equipment is expected to last five years. On June 30, 2024, the first of five annual payments of $140,000 will be made. A payment of $20 000 to the lessor for insurance and equipment maintenance is included in these instalments. Additional details The implicit interest rate is 8%. A $1 annuity in arrears for five years at 8% yields $3.4927 in present value. Determine the initial lease obligation measurement; b) Determine the initial right-of-use asset cost
ABC Ltd executes a five-year lease agreement with Legal Ltd for a piece of machinery on July I, 2023. At the end of the fifth year, ABC Ltd will be willing to execute a bargain purchase option for $90,000. The equipment is expected to last five years. On June 30, 2024, the first of five annual payments of $140,000 will be made. A payment of $20 000 to the lessor for insurance and equipment maintenance is included in these instalments. Additional details The implicit interest rate is 8%. A $1 annuity in arrears for five years at 8% yields $3.4927 in present value. Determine the initial lease obligation measurement; b) Determine the initial right-of-use asset cost
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:ABC Ltd executes a five-year lease agreement with Legal Ltd for a piece of machinery
on July I, 2023. At the end of the fifth year, ABC Ltd will be willing to execute a
bargain purchase option for $490,000. The equipment is expected to last five years. On
June 30, 2024, the first of five annual payments of $140,000 will be made. A payment
of $20 000 to the lessor for insurance and equipment maintenance is included in these
instalments. Additional details The implicit interest rate is 8%. A $1 annuity in arrears
for five years at 8% yields $3.4927 in present value. Determine the initial lease
obligation measurement, b) Determine the initial right-of-use asset cost
measurement; c) Submit the accounting journal entries for the fiscal year ending 30
June 2024.
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