On 1 April 20X8 Hop entered a two-year lease agreement for a photocopier and on that date made a payment of £1,000. The second payment is due on 1 April 20X9 which is £2, 000. This has been classified as a 'low value asset. The £1,000 has been recorded as Dr Administration expenses, Cr Bank

On 1 April 20X8 Hop entered a two-year lease agreement for a photocopier and on that date made a payment of £1,000. The second payment is due on 1 April 20X9 which is £2, 000. This has been classified as a 'low value asset. The £1,000 has been recorded as Dr Administration expenses, Cr Bank

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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Please answer in good accounting form. Thanks! On January 1, 2020, EEE Corp. leased a warehouse for 5 years at an annual rental of ₱575,000 payable every December 31. The equipment had an estimated life of 8 years and shall revert back to the lessor at the expiration of the lease term. The lessee paid the lessor a lease bonus of ₱250,000 and was also responsible as per the lease agreement to pay the broker fees and commission amounting to ₱180,000. As an incentive however, the lessor shall reimburse EEE Corp. 75% of the said initial direct cost. The implicit lease rate known to both parties was at 12% while EEE Corporation’s incremental borrowing rate was at 10%.Requirements: (Use a PV FACTOR rounded off to 4 decimal places) 8. Depreciation expense on the Right of Use Asset in 2020 (under Straight Line Method)9. Carrying value of the Right of Use Asset as of December 31, 2021
A transport Company leased 4 buses for a period of 5 years from a leasing company. The fair value of each bus is OMR 15,000 at the beginning of the lease period. The Trucks have a life time of 5 years and no residual value. As per the lease agreement, the title of the buses are to be transferred to the transport company by the end of the lease period. The annual lease payment is OMR 15,000 payable at the beginning of each year. An interest rate of 10% and straight line method of depreciation is applicable. a. Determine the type of lease b. Determine the PV of minimum lease payments? c. Prepare amortization table. d. Record journal entries in the books of transport company
On 1 January 2016, company A owned an asset with a net book of RM 100000. The fair value of the asset on this date was RM 120000. On this date, company A sold the asset to Granite Bhd for RM 150000 and immediately leased back the asset for a period of 5 years. The leaseback is an operating lease. Explain how company A shall account for the sale and leaseback transaction and show the journal entries required.
Your client bought investment property at 157 Kissing Point Rd, Dundas, NSW 2117 for $445,000 under a contract dated 01 May 1998. The contract provided for the payment of a deposit of $85,000 on that date, with the balance of $360,000 to be paid on the settlement on 15 May 1998. Your client paid a stamp duty of $10,500 on 30 May 1998. On 1 June 1998, he received an invoice for solicitor’s fees of $6,300, which he paid as part of the settlement process. He sold the property on 01 July 2018(the day the contracts were exchanged) for $730,000. He incurred costs of $1,500 in solicitor’s fees and $30,000 in agent’s commission. During the entire ownership period, the property was used for producing assessable income. Your client had the following expenses for this property: ✓ Council rates $5,800 (not claimed in the previous tax return) ✓ Land tax $7,700 (not claimed in the previous tax return) ✓ Maintenance $20,100 (not claimed in the previous tax return) ✓ Bank Interest…
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.
Helpful plc is a finance company. It purchased computer equipment for R78 500 and leased it to Chatroom Ltd under a three year lease with three payments of R29 000 payable annually in advance. Chatroom Ltd agreed to pay R830, which represented the cost of setting up the lease. At the end of the first year, the balance sheet reported a balance of R55 363. The implicit rate of interest is 10%. What amount will be recognised in the Helpful plc income statement as interest in the second year? Select one: a. R5 536 b. R2 636 c. R830 d. R29 000
10. On 1 July 2008, Copper Coin Ltd leased a photocopier from Silver Note Corp., a company that manufactures, retails and lease copiers. The photocopier has cost Silver Note Corp. $30,000 to make but had a fair value on 1 July 2008 of $35,080. The lease agreement contained the following provisions: Lease term 3 years Annual payment, payable in advance on 1 July each year $ 14,500 Economic life of the copier 4 years Estimated residual value at the end of the lease term when the $3,000 copier is returned to Silver Note Corp. Residual value guaranteed by Copper Coin $ 1,500 Interest rate implicit in the lease 10% The lease is cancellable, provided another lease is immediately entered into. The annual payment included an amount of $2,500 p.a. to reimburse Silver Note Corp. for the cost of paper and toner supplied to Copper Coin Ltd. Silver Note Corp.'s solicitor prepared the lease agreement for a fee of $1,365. On 30 June2011, at the end of the lease term, Copper Coin Ltd retuned the…
On January 1, 2013, Gloss Limited signed off on a leasing contract with MR Stationery to lease a photocopier. These detail relate to the lease contract.The cost of the photocopier is $525,000 and the fair value of the equipment on January 1 2013 is $700,000.The term of the lease is 7 years with no option to renew and the photocopier has an estimated useful life of 9 yearsAt the end of the lease term, the photocopier must be returned to Gloss Limited. It has a guaranteed residual value of $50,000. MR Stationery uses the straight line method of depreciation The lease agreement is annual rental payments beginning January 1 2013Boss Limited desires a 5% rate of return, which is known to MR. MR Stationery’s incremental borrowing rate is 7%.Requirements: the financial year ends on December 31explain the nature of the lease for the lessee using the 5 criteria, prepare the lease schedule for the lessee, prepare the necessary journal entries for January 1 2013 and Dec 31 2013
The Arcade Company entered into a 10 year lease under which it made payments of R26 720 annually in advance. Arcade's borrowing rate was 10% per annum. The present value of the land was R125 000 and that of the buildings was R125 000. The value of the land at the end of 10 years was R167 500 and the value of the buildings was R32 500. The land would be classified as Select one: O a. a finance lease O b. an accounting lease O c. a financial lease O d. an operating lease
(a) In accordance with HKFS 16, it requires lessee to recognize a right-of-use asset and a lease liability for all leases. Therefore, Cherry Ltd should recognize the initial measurement of a right-of-use asset and a lease liability as follows: Discount rate Unpaid lease payment -2nd - 5th payment $800,000 x 3.17 Initial measurement of a lease liability Initial measurement of lease liability Lease payment made at commencement date Initial direct cost – commission Initial direct cost – legal fee Initial measurement of a right-of-use asset (b) The lease liability from 2013 to 2017 are as follows: PV 10% 3.17 2,536,000 2,536,000 2,536,000 800,000 20,000 15,000 3,371,000 Lease liability Year Opening balance Lease Lease liability payment after lease Interest expenses 10% Closing balance 1 Jan (a) (b) payment (c) = (a) - (b) 31 Dec (d) = (c) x 10% |(e) = (c) +(d) 2013 2,536,000 2,536,000 253,600 2,789,600 2014 2,789,600 800,000 1,989,600 198,960 2,188,560 2015 2,188,560 800,000 1,388,560…
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10. On July 1, 20x6, Entity A leased a delivery truck from Entity B under a 3-year operating lease. Total rent for the term of the lease will be P36,000, payable as follows: 12 months at P 500 = P 6,000 12 months at P 750 = 9,000 12 months at P1,750 = 21,000 All payments were made when due. In Entity B's June 30, 20x8, balance sheet, the accrued rent receivable should be reported as c. 12,000 d. 21,000 b. 9,000 (AICPA)