JKUAT hires out individual plants on long term basis on operational lease. On 1st January 2001,it entered into a seven year lease on a mobile crane. The terms of the lease are Kshs. 1,750,000payable on 1st January 2001, followed by six rentals of Kshs. 700,000 paid on 1st January 2001-2007. The crane will be returned to JKUAT on December 31st 2007. The cost of the crane isKshs. 880,000 and has a 25 year useful life with no residual value.Required:a) Calculate the annual rental income that will be claimed by JKUAT for years 2001 and2002.b) Prepare the extracts from the statement of comprehensive income and the statement offinancial position for JKUAT in the year 2001 and 2002.c) Outline any common loss contingencies in an organization.d) Briefly explain the contents of a pension plan

a) Calculate the annual rental income that will be claimed by JKUAT for years 2001 and 2002.The…

Answered: JKUAT hires out individual plants on…

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 January 1, 2018, Robertson Construction leased several items of equipment under a two-year operating lease agreement from Jamison Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $46,000 each, payable semiannually on June 30 and December 31 each year. The equipment was acquired by Jamison Leasing at a cost of $366,000 and was expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semi-annually. Required:Prepare the appropriate journal entries for the lessor (Jamison Leasing) from the beginning of the lease through the end of 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amounts.)
On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two- year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. • The contract calls for four rent payments of $10,000 each, payable semiannually on June 30 and December 31 each year. • The computers were acquired by ComputerWorld at a cost of $90,000 and were expected to have a useful life of five years with no residual value. • Both firms record amortization and depreciation semiannually. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. Prepare appropriate journal entries recorded by Nath-Langstrom Services for the first year of the lease. 2. Prepare appropriate journal entries recorded by ComputerWorld Leasing for the first year of the lease. Complete this question by entering your answers…
Wildhorse Limited, a public company following IFRS, decided to upgrade the coffee machines in all of its office locations. Wildhorse leased 45 machines from Coffee Tyme Ltd. on July 1, 2023. (To purchase the coffee machines instead would have cost Wildhorse $315 per machine, and the machines would have lasted an estimated five years.) The lease calls for semi-annual payments for the next three years, in the amount of $30 per machine. The payments start on July 1, 2023. At the end of the three-year period, the machines will have to be returned to the lessor. Prepare the entry for the first payment on July 1, 2023. (List debit entry before credit entry. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit July 1 Would the entry for the first payment differ if Wildhorse followed ASPE? The entry ☑…
Crane SA manufactures an X-ray machine with an estimated life of 12 years and leases it to Chambers Medical Center for a period of 10 years. The normal selling price of the machine is R$594,813, and its guaranteed residual value at the end of the non-cancelable lease term is estimated to be R$18,000. The hospital will pay rents of R$72,000 at the beginning of each year. Crane incurred R$410,000 in manufacturing cost and R$14,200 in legal fees directly related to the signing of the lease. Crane has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 5%. Click here to view factor tables. Discuss the nature of this lease in relation to the lessor. The nature of this lease in relation to the lessor is Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to O decimal places, e.g. 5,275.) (1) (2) (3) Lease receivable at commencement of the…
Kingbird Company manufactures a check-in kiosk with an estimated economic life of 12 years and leases it to National Airlines for a period of 10 years. The normal selling price of the equipment is $304,659, and its unguaranteed residual value at the end of the lease term is estimated to be $19.400. National will pay annual payments of $40,800 at the beginning of each year. Kingbird incurred costs of $164,100 in manufacturing the equipment and $3,900 in sales commissions in closing the lease. Kingbird has determined that the collectibility of the lease payments is probable and that the implicit interest rate is 8%. Click here to view factor tables. (a) Discuss the nature of this lease in relation to the lessor. This is a sales-type lease Compute the amount of each of the following items. (Round present value factor calculations to 5 decimal places, eg. 1.25124 and the final answers to O decimal places, eg. 5.275) (1) Lease receivable S (2) Sales price S (3) Cost of sales $
On January 1, James Industries leased equipment to a customer for a six-year period, at which time possession of the leased asset will revert back to James. The equipment cost James $760,000 and has an expected useful life of eight years. Its normal sales price is $760,000. The residual value after six years is $100,000. Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate is 8%. Calculate the amount of the annual lease payments. Chart to Use: Table or calculator function: Amount to be recovered (fair value) Present value of the residual value Table or calculator function: S Amount to recovered through periodic lease payments Lease Payment Amount of each annual lease payment. Residual Value n= i= n= i= Present value Lease Payments
Fundo entered into a 20-year operating lease for a property on 1 October 2000 which has a remaining life of eight years at 1 October 2012. The rental payments are $2.3 million per annum. Prior to 1 October 2012, Fundo obtained permission from the owner of the property to make some internal alterations to the property so that it can be used for a new manufacturing process which Fundo is undertaking. The cost of these alterations was $7 million and they were completed on 1 October 2012 (the time taken to complete the alterations can be taken as being negligible). A condition of being granted permission was that Fundo would have to restore the property to its original condition before handing back the property at the end of the lease. The estimated restoration cost on 1 October 2012, discounted at 8% per annum to its present value, is $5 million. Required: (a) Explain how the lease, the alterations to the leased property and the restoration costs should be treated in the financial…
On January 1, Keunho Industries leased equipment to a customer for a four-year perlod, at which time possession of the leased asset will revert back to Keuntia The equipment cost Keunho $270,000 and has an expected useful life of six years. Its normal sales price is $270,000. The residual value after four years is $100,000 Lease payments are due on December 31 of each year, beginning with the first payment at the end of the first year. The interest rate is 9% What is the amount of the annual lease payments? Note: Round your answer to the nearest whole dollar amount. The present value of $t: n=4,/9% is 0.70843 The present value of an ordinary annuity of $1: n=4, / -9% is 3.23972. The present value of an annuity due of $1: n=4./=9% is 3.53129. Multiple Choice O $54,166 $56,398 4
On January 1, 2021, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $10,000 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $90,000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually.Required:Prepare the appropriate entries for both (a) the lessee and (b) the lessor from the beginning of the lease through the end of 2021.
On December 31, 2013, Corporation A leased equipment to Company B for a five-year period. The annual lease payment, excluding executory costs is $42,000. The interest rate for this lease is 10%. The payments are due on December 31 of each year. The first payment was made on December 31, 2013. The normal cash price for this type of equipment is $150,000 while the cost to Corporation A was $118,000. For the year ended December 31, 2013, by what amount will Corporation A's pretax earnings increase from this lease?
Gordon Inc., a private company that follows ASPE, entered into a lease agreement with Canada Leasing Corporation to lease a warehouse for six years. Annual lease payments are $21,000, payable at the beginning of each lease year. Gordon Inc. signed the lease agreement on January 1, 2021, and made the first payment on that date. At the end of the lease, the machine will revert back to Canada Leasing Corporation. The normal useful life of the warehouse is 10 years. At the time of the lease, the warehouse could be purchased for $108,000. Gordon does not know the implicit rate of the lease; Gordon's incremental borrowing rate is 10%. Gordon uses straight-line depreciation for this type of asset. Required: Using the three criteria under ASPE, prove whether this is an operating or capital lease. Prepare a lease amortization schedule for the lease. Round all amounts to the nearest dollar. Prepare the journal entries for 2021 and 2022 for Gordon Inc. Round amounts to the nearest…
Braun Company acquired a piece of equipment from Tipper Company under a lease agreement. The lease requires six annual lease payments of $35.000 with the first payment due when the lease begins, on January 1, 2020. Future lease payments are due on January 1 of each year of the lease term. The interest rate in the lease is 10%. What amount should Braun Company debit the equipment account on the date of acquisition. Round answer to the nearest dollar). $225,000 $32.678 $167,678 O$152434 Braun Company would not debit the equipment account because the equipment is being cased and not purchased.

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