Date of entering lease: 1 July 2023. Duration of lease: 4 years. Life of leased asset: 5 years, after which it will have no residual valu Lease payments: $92,000 at the end of each year. The interest rate implicit in the lease: 10 per cent. Unguaranteed residual: $42,000. The fair value of the boat at the inception of the lease: $320,317.
Date of entering lease: 1 July 2023. Duration of lease: 4 years. Life of leased asset: 5 years, after which it will have no residual valu Lease payments: $92,000 at the end of each year. The interest rate implicit in the lease: 10 per cent. Unguaranteed residual: $42,000. The fair value of the boat at the inception of the lease: $320,317.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
D1.
Account
Transcribed Image Text:Fast Ferries Ltd leased a boat from a boat dealer, Sydney Boats Ltd. Sydney Boats Ltd acquired the boat at a cost of
$172,000.The boat will be painted with Fast Ferries logo and advertising and the cost of repainting the boat to make it
suitable for another owner four years later is estimated to be $32,000. Fast Ferries Ltd plans to keep the boat after the
lease but has not made any commitment to the lessor to purchase it. The terms of the lease are as follows:
• Date of entering lease: 1 July 2023.
• Duration of lease: 4 years.
• Life of leased asset: 5 years, after which it will have no residual value.
• Lease payments: $92,000 at the end of each year.
• The interest rate implicit in the lease: 10 per cent.
• Unguaranteed residual: $42,000.
• The fair value of the boat at the inception of the lease: $320,317.
REQUIRED: Prepare the journal entries to account for the lease transaction in the books of the lessor, Sydney Boats Ltd, at
1 July 2023 and 30 June 2024.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
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