Billy Limited (lessee) and Bob Limited (lessor) enter into a finance lease agreement on 1 July 2022 with the following terms: ⚫ lease term is 4 years • estimated economic life of the leased asset is 6 years 4 × annual rental payments of $15,000 each payable in arrears ⚫ residual value at the end of the lease term is not guaranteed to be $20,000 ⚫ esitmated fair value of the leased asset at the end of the lease term to be $18,000 ⚫ interest rate implicit in the lease is 8%. Billy Ltd intends to return the asset to Bob Ltd at the end of lease term Required: What is the initial lease liability that Billy Ltd needs to recognise at the lease commencement date? $49 682 $64 383 $62 912 $51 152
Billy Limited (lessee) and Bob Limited (lessor) enter into a finance lease agreement on 1 July 2022 with the following terms: ⚫ lease term is 4 years • estimated economic life of the leased asset is 6 years 4 × annual rental payments of $15,000 each payable in arrears ⚫ residual value at the end of the lease term is not guaranteed to be $20,000 ⚫ esitmated fair value of the leased asset at the end of the lease term to be $18,000 ⚫ interest rate implicit in the lease is 8%. Billy Ltd intends to return the asset to Bob Ltd at the end of lease term Required: What is the initial lease liability that Billy Ltd needs to recognise at the lease commencement date? $49 682 $64 383 $62 912 $51 152
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Billy Limited (lessee) and Bob Limited (lessor) enter into a finance lease agreement on 1 July 2022 with the following terms:
⚫ lease term is 4 years
• estimated economic life of the leased asset is 6 years
4 × annual rental payments of $15,000 each payable in arrears
⚫ residual value at the end of the lease term is not guaranteed to be $20,000 ⚫ esitmated fair value of the leased asset at the end of the lease term to be $18,000
⚫ interest rate implicit in the lease is 8%.
Billy Ltd intends to return the asset to Bob Ltd at the end of lease term
Required:
What is the initial lease liability that Billy Ltd needs to recognise at the lease commencement date?
$49 682
$64 383
$62 912
$51 152
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