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
Related questions
Question
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
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education