Ibri Ltd manufactures specialised molding machinery for both sale and lease. On 1 July 2015 Ibri Ltd leased a machine to Dubai Ltd. The machine being leased cost Ibri Ltd $195,000 to make and its fair value at 1 July 2015 is considered to be $212,000. The terms of the lease are as follows: The lease term is for 6 years, starting on Annual lease payment, payable on 30 June each year Estimated useful life of machine (scrap value $2500) Estimated residual value of machine at end of lease term Residual value guaranteed by Dubai Ltd Interest rate implicit in the lease The annual lease payment includes an amount of $7500 to cover annual maintenance and insurance costs. Dubai Ltd may cancel the lease only with the consent of Ibri Ltd Dubai Ltd intends to lease a new machine at the end of the lease term. Required Classify the lease for both Ibri Ltd and Dubai Ltd. Justify your answer 1 July 2015 $47,500 8 years $37,000 $30 000 10%

Ibri Ltd manufactures specialised molding machinery for both sale and lease. On 1 July 2015 Ibri Ltd leased a machine to Dubai Ltd. The machine being leased cost Ibri Ltd $195,000 to make and its fair value at 1 July 2015 is considered to be $212,000. The terms of the lease are as follows: The lease term is for 6 years, starting on Annual lease payment, payable on 30 June each year Estimated useful life of machine (scrap value $2500) Estimated residual value of machine at end of lease term Residual value guaranteed by Dubai Ltd Interest rate implicit in the lease The annual lease payment includes an amount of $7500 to cover annual maintenance and insurance costs. Dubai Ltd may cancel the lease only with the consent of Ibri Ltd Dubai Ltd intends to lease a new machine at the end of the lease term. Required Classify the lease for both Ibri Ltd and Dubai Ltd. Justify your answer 1 July 2015 $47,500 8 years $37,000 $30 000 10%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Alfredo Ltd (lessor) entered into an agreement on 1 July 2022 to lease a processing plant to Fatimah Ltd (lessee). Alfredo considers this lease contract as a manufacturer-type lease. The cost of the plant to Alfredo is $85411. The terms of the lease agreement were: Lease term: 3 years; Economic life of plant: 5 years; • Annual rental payment, in arrears (commencing 30/6/2020): $165,000; Residual value guaranteed by Fatimah Ltd: $60,000; Interest rate implicit in the lease: 8%; •The lease is cancellable, but only with the permission of the lessor; and At the end of the lease term, the plant is to be returned to Alfredo Ltd. In setting up the lease agreement, Alfredo Ltd incurred $9851 in legal fees and stamp duty costs. The annual rental payment of $165,000 includes $15,000 to reimburse Alfredo Ltd for maintenance costs incurred on behalf of Fatimah Ltd. The net profit recognised by Alfredo on 1 July 2022 on the day of the lease inception is? PLEASE ENTER YOUR ANSWER IN WHOLE NUMBERS NO…
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Zhang Company leased equipment from Mann Industries. The lease agreement qualifies as a finance lease and requires annual lease payments of $52,538 over a six-year lease term (also the asset's useful life), with the first payment on January 1, the beginning of the lease. The interest rate is 5%. The asset being leased cost Mann $230,000 to produce. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) Required: 1. Determine the price at which the lessor is "selling" the asset (present-value of the lease payments). 2. What would be the amounts related to the lease that the lessor would report in its income statement for the year ended December 31 (ignore taxes)? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine the price at which the lessor is "selling" the asset (present value of the lease payments). Note: Round your intermediate and final answers to the nearest whole…