LTK BHD entered into an agreement to lease a forklift from HEAVY MACHINERY BHD on 1 January 2020. The lease is for six-year which requires LTK to make annual payments of RM25,000, payable in advance on 1 January 2020 and subsequently on 31 December each year. At the end of the lease, the forklift will be returned to HEAVY MACHINERY BHD. The cost of machine is RM200,000 with the expected residual value of RM20,000 and useful life of 10 years. PRESENT VALUE TABLE

LTK BHD entered into an agreement to lease a forklift from HEAVY MACHINERY BHD on 1 January 2020. The lease is for six-year which requires LTK to make annual payments of RM25,000, payable in advance on 1 January 2020 and subsequently on 31 December each year. At the end of the lease, the forklift will be returned to HEAVY MACHINERY BHD. The cost of machine is RM200,000 with the expected residual value of RM20,000 and useful life of 10 years. PRESENT VALUE TABLE

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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PRIMAX BHD signed a five-year contract to lease a machinery to LM BHD on 1 January 2020. The contract requires LM BHD. to make an annual payment of RM18,000 on the signing date and subsequently on 31 December every year. LM BHD has guaranteed RM8,000 on the residual value. The machinery was purchased by PRIMAX at RM100,000 on 1 January 2019 with an estimated residual value of RM10,000 and useful life of seven years. PRESENT VALUE TABLE i. Assuming the implicit rate is 8 percent, show the journal entry on 1 January 2020 for PRIMAX BHD. ii. Show all the journal entries on 31 December 2020 related to the lease for PRIMAX BHD.
On 1 March 2020,the company entered into a lease agreement in order to lease a manufacturing machine with a costprice of R250 000 (VAT inclusive). The period of the lease is five years, and the useful life of the machinery is estimatedat six years. The following is an extract from the lease agreement:4.1.1 Ownership of the machinery will be transferred to the Lessee at the end of the lease.4.1.2 Should the Lessee cancel the lease, the Lessor’s losses will be borne by the Lessee.Monthly instalments are payable in arrears and amount to R5 947 (VAT inclusive). The company used themanufacturing machine for a qualifying purpose. The company is a registered VAT vendor.Required:Provide the deferred tax movement per the balance sheet method for the lease agreement for the financial year ending31 December 2021. Clearly indicate whether the movement represents an income or an expense. Note:- Show all calculations, marks are awarded for calculations.- You may round off to the nearest Rand.
Darwin Limited entered into a lease agreement on 1 July 2020 for its demolition machinery. The duration of the lease is four years. The cost price of the machinery was R1 800 000. Installments of R432 649 are payable annually in arrears on 30 June. The implicit interest rate is 15% per annum. Ownership will be transferred to Darwin Limited at the end of the lease term. Darwin Limited depreciates machinery over 10 years using the straight-line method, with nil residual value. The wear and tear allowance on machinery is at a rate of 25% per annum using the straight-line method. REQUIRED: Show ONLY the following three-line items in the Statement of Financial Position as at 30 June 2021: Right of use asset Current portion of lease liability Lease liability
NCH Bhd signed a lease agreement to lease one piece of computer equipment with KHL Bhd on 1 January 2022 with a lease rental of RM150,000 each per annum at the end of each financial year for 5 years. NCH Bhd also needs to pay an installation fee amounting to RM5,000. The lease agreement specifies that NCH Bhd has full control over the use of the computer equipment throughout the arrangement period. The estimated useful life of the computer equipment is five years and the guaranteed residual value at the end of the lease period is RM20,000. The lease rental was calculated and mutually agreed upon with a 10% rate of return. It is the policy of the company to adopt a cost model to initially and subsequently measure its property, plant and equipment, and the straight-line method is adopted to depreciate the property, plant and equipment. Required: a. b. Year (n) Discount factor at 10% [Single] (i) Discount factor at 10% [Annuity] (i) C. 1 0.9091 0.9091 2 3 4 5 0.8264 0.6830 0.6209 0.7513…
On January 1, 2020, EF Corp. leased an equipment for 5 years at semi-annual rental of ₱325,000 payable every June 30 and December 31. The equipment had an estimated useful life of 7 years. EF Corp. has an option to purchase the equipment from the lessor by paying the lessor ₱200,000 at the lease expiration date. The lessee paid lease bonus amounting to ₱280,000 and direct lease expense which included installation and commissioning costs amounting to ₱125,000. The lessor will however reimburse EF Corp. 15% of the direct lease expense as a lease incentive.The annual implicit lease rate on the lease known to both parties at the lease inception was at 10% while the incremental borrowing rate of the EF Corp. was at 12%. The asset had an estimated salvage value of ₱100,000 after 5 years and ₱60,000 after 7 years. Requirements: If at lease inception, EF Corp. is reasonably certain to exercise the purchase option: (Use a PV FACTOR rounded off to 4 decimal places) 10. Initial cost of the Right…
On January 1, 2020, EF Corp. leased an equipment for 5 years at semi-annual rental of ₱325,000 payable every June 30 and December 31. The equipment had an estimated useful life of 7 years. EF Corp. has an option to purchase the equipment from the lessor by paying the lessor ₱200,000 at the lease expiration date. The lessee paid lease bonus amounting to ₱280,000 and direct lease expense which included installation and commissioning costs amounting to ₱125,000. The lessor will however reimburse EF Corp. 15% of the direct lease expense as a lease incentive.The annual implicit lease rate on the lease known to both parties at the lease inception was at 10% while the incremental borrowing rate of the EF Corp. was at 12%. The asset had an estimated salvage value of ₱100,000 after 5 years and ₱60,000 after 7 years.Requirements: If at lease inception, EF Corp. is reasonably certain to exercise the purchase option: (Use a PV FACTOR rounded off to 4 decimal places) Entry to record the…
On 1 January 2020, the company had entered into a five-year lease agreement for an office space with GP S.A.O.G. The company must make lease payments of OMR 50,000 annually at the beginning of each year. The present value of the total lease payments is OMR 208,500. The cost of capital used is 10%. What amount should be recognised in right-to-use-asset as per IFRS 16 in the books of the lessee. O a. OMR 158,500. O b. OMR 208,500. OC. OMR 250,000. O d. OMR 25,000.
On January 1, 2020, Bacarra Company leased an asset for a term of six years. Annual rentals of P500,000 is payable every yearend. The cost of the leased asset is P2,100,000. Initial direct costs paid by Bacarra totaled P6,360. The asset will revert to Bacarra at the end of the lease term, when its residual value would amount to P100,000. Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, how much is cost of sales resulting from the lease?
On January 1, 2020, Bacarra Company leased an asset for a term of six years. Annual rentals of P500,000 is payable every yearend. The cost of the leased asset is P2,100,000. Initial direct costs paid by Bacarra totaled P6,360. The asset will revert to Bacarra at the end of the lease term, when its residual value would amount to P100,000. Assume it is a sales-type lease with an implicit rate of 10%, how much is the net lease receivable as of yearend 2020? Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, how much should be credited to sales resulting from the lease? Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, how much is cost of sales resulting from the lease? Assume it is a sales-type lease with an implicit rate of 10% and the residual value is unguaranteed, how much is the net income from the lease to be reported in 2020? Assume the residual value is unguaranteed and the fair…
On January 1, 2020, Bacarra Company leased an asset for a term of six years. Annual rentals of P500,000 is payable every yearend. The cost of the leased asset is P2,100,000. Initial direct costs paid by Bacarra totaled P6,360. The asset will revert to Bacarra at the end of the lease term, when its residual value would amount to P100,000. Assume it is a sales-type lease with an implicit rate of 10% and the residual value is guaranteed, how much is the net income from the lease to be reported in 2020?
On 1 July 2020, Andrew Ltd enters into a 5-year agreement to lease an item of machinery from Josh Ltd. Andrew Ltd incurred costs of $4 500 in setting up the lease agreement. The machinery has a fair value of $450 000 at the inception of the lease and it is expected to have an economic life of 6 years, after which time it will have a residual value of $35 000. The lease agreement details are as follows: Length of lease 5years Commencement date 1 July 2020 Annual lease payment, payable 30 June each year commencing 30 June 2021 $95,000 Residual value at the end of the lease term $80,000 Residual value guarantee by Andrew Ltd $50,000 Interest rate implicit in the lease 10% The lease is cancellable without any penalties All insurance and maintenance costs are paid by Josh Ltd and are expected to amount to $15 000 per year and will be reimbursed by Andrew Ltd by being included in the annual lease payment of $95 000. The machinery will be…
On 1 January 20X1, T Bhd entered into a lease agreement to lease a machinery from Q Bhd (of which RM4,000 deposits was immediately paid) for a four year period. The machinery had a fair value of RM16,680 (straight-line depreciation should be used) at 1 January 20X1 and the lease agreement requires four further annual payments of RM4,000 each starting on 31 December 20X1. The interest rate implicit in the lease is to be taken as 10% per annum. The expected useful life of the machinery is five years, at the end of which the residual value is estimated to be nil. At the end of the lease period the title to the asset is transferred to the lessee. Required: Prepare extracts of the statement of profit or lossof T Bhd (lessee) for the years ended 31 December 20X1, 20X2, 20X3 and 20X4 and the statement of financial position as at that date in accordance with IFRS 16.