machine and immediately leased it back at market rental.The details of the sale and leaseback are:Annual rental payable at the end of each yearAt the beginning of current year, Juan Company sold aProblem 15-3 (IFRS)the beginning of current year, Juan Company sold aSale price at fair valueFair value of machineCarrying amount of machine5,000,0005,000,0004,500,000600,00010 years5 years10%Remaining life of machineLease termImplicit interest ratePresent value of an ordinary annuity of 1 at 10%for five periods3.791The leaseback provides for neither transfer of title to thelessee nor a purchase option that is reasonably certain to beexercised.Required:1. Compute the initial measurement of lease liability.2. Compute the cost of right of úse asset.3. Determine the gain on right to transferred to thebuyer-lessor.4. Prepare journal entries on the books of seller-lessee for thecurrent year.. Prepare journal entries on the books of buyer-lessorfor the current year.

“Since you have asked multiple sub-parts, we will solve the first three sub-parts for you. If you…

Problem 15-3 (IFRS) At the beginning of current year, Juan Company sold a machine and immediately leased it back at market rental. The details of the sale and leaseback are: Sale price at fair value Fair value of machine Carrying amount of machine Annual rental payable at the end ofeach year Remaining life of machine Lease term Implicit interest rate Present value of an ordinary annuity of l at 10% for five periods 5,000,000 5,000,000 4,500,000 600,000 10 years 5 years 10% 3.791 The leaseback provides for neither transfer of title to the lessee nor a purchase option that is reasonably certain to be exercised. Required: 1. Compute the initial measurement of lease liability. 2. Compute the cost of right of use asset.

Problem 15-3 (IFRS) At the beginning of current year, Juan Company sold a machine and immediately leased it back at market rental. The details of the sale and leaseback are: Sale price at fair value Fair value of machine Carrying amount of machine Annual rental payable at the end ofeach year Remaining life of machine Lease term Implicit interest rate Present value of an ordinary annuity of l at 10% for five periods 5,000,000 5,000,000 4,500,000 600,000 10 years 5 years 10% 3.791 The leaseback provides for neither transfer of title to the lessee nor a purchase option that is reasonably certain to be exercised. Required: 1. Compute the initial measurement of lease liability. 2. Compute the cost of right of use asset.

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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