help On March 31, 2020, Ahlam Corporation signed a 5-year noncancelable lease for amachine. The terms of the lease called for Ahlam to make annual payments of$10,485 starting April 1, 2021. The machine has an estimated useful life of 6 years.Ahlam uses the straight-line method of depreciation for all of its plant assets. Ahlam'sincremental borrowing rate is 8%. The lessee is aware that the lessor used an implicitrate of 10% in computing the lease payments (present value factor for 5 periods at8%, 3.993; at 10%, 3.791).Instructionsa. What type of lease is this? Explain.b. Compute the present value of the minimum lease paymentsc. Prepare all necessary journal entries for Ahlam for this lease throughDecember31, 2021. (Round all amounts to the nearest dollar. Include a partialamortization schedule.)

Ahlam Corporation has signed a 5 year non cancelable lease for a machine. The lease term is 5 years…

Instructions a. What type of lease is this? Explain. b. Compute the present value of the minimum lease payment c. Prepare all necessary journal entries for Ahlam for this lease through December31, 2021. (Round all amounts to the nearest dollar. Include a partial amortization schedule.)

Instructions a. What type of lease is this? Explain. b. Compute the present value of the minimum lease payment c. Prepare all necessary journal entries for Ahlam for this lease through December31, 2021. (Round all amounts to the nearest dollar. Include a partial amortization schedule.)

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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On March 31, 2020, Ahlam Corporation signed a 5-year noncancelable lease for a machine. The terms of the lease called for Ahlam to make annual payments of $10,485 starting April 1, 2021. The machine has an estimated useful life of 6 years. Ahlam uses the straight-line method of depreciation for all of its plant assets. Ahlam’s incremental borrowing rate is 8%. The lessee is aware that the lessor used an implicit rate of 10% in computing the lease payments (present value factor for 5 periods at 8%, 3.993; at 10%, 3.791). Instructions What type of lease is this? Explain. Compute the present value of the minimum lease payments. c. Prepare all necessary journal entries for Ahlam for this lease through December 31, 2021. (Round all amounts to the nearest dollar. Include a partial amortization schedule.)
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On January 1, 2023, Shrek Inc. enters into a seven-year non-cancellable lease with Fiona Ltd. for machinery having an estimated useful life of nine years and a fair value of $4,300,000. Shrek’s incremental borrowing rate is 8% and Fiona’s implicit rate is 6%. Shrek uses the straight-line depreciation method to depreciate assets. Shrek will make annual lease payments on January 1 of each year. The lease includes a guarantee by Shrek Inc. that Fiona Ltd. will realize $100,000 from selling the asset at the expiration of the lease, which Shrek expects to pay. Both companies adhere to IFRS. Instructions a) Calculate the lease payment Fiona Ltd. will charge Shrek (assuming no mark-up of the machinery from fair value). Round to the nearest dollar. b) Calculate the present value of the lease payments. Round to the nearest dollar. c) What kind of lease is this to Shrek Inc.? Why? d) Present the journal entries that Shrek Inc. would record during the first year of the lease. Round to the nearest…
on January 1, 2023, Ivanhoe Inc enters into a 5-year non-cancellable lease with Wilson ltd for equipment that has an estimated useful life of 5 years and a fair value of $2,026,000. Ivanhoe has an incremental borrowing rate at 8% and Wilson’s implicit rate is 6%. Ivanhoe uses the straight- line depreciation method to depreciate assets . Ivanhoe will make annual lease payments on January 1 of each year (with first payment due at the beginning of the lease) based on the fair value of the equipment. The lease agreement includes a guarantee that Ivanhoe will take over ownership of the equipment from Wilson for a final payment of $97,500. Both companies adhere to IFRS A) Calculate the present value of minimum lease payments
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