o ente
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On 1 July 2022, ABC Ltd enters into a four-year lease of a machine. ABC Ltd will pay fixed annual payments of $90 000 for four years with the first payment on 30 June 2023
To enter the lease ABC Ltd incurs direct costs of $12 000 at the commencement of the lease term
There is a bargain purchase price option (that ABC Ltd is willing to exercise) for $30 000 at the end of the lease term
The machine is expected to have a useful life of 10 years and no residual value. Lessee’s incremental borrowing rate: 10%
Required:
1. Determine the initial measure of the lease liability and right-of-use asset and prepare the related accounting journal entry .
2. Prepare the lease payment schedule.
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