Question 11. C Ltd has a fiscal year end of Sep. 30h. On Oct. 1, 20X8 C Ltd leases an asset to a lessee for a term of five years. The lessee is required to nake five lease payments of £27,500, starting with Oct 1, 20X8. The fair value of the asset on Oct 1, 20X8 is £113,500. C Ltd incurs initial lirect costs of £421 and the rate of interest implicit in the lease is 12%. At the end of the lease term, ownership of the asset will remain with C Ltd, the asset is expected to have come to the end of its economic life and to have a residual scrap value of £5,100. Provide two reasons for why this lease is a finance lease and not an operating lease. ) Calculate the net investment in the lease at commencement. i) Prepare lessor's journal entries for the year ending Sep. 30th, 20X9.

Question 11. C Ltd has a fiscal year end of Sep. 30h. On Oct. 1, 20X8 C Ltd leases an asset to a lessee for a term of five years. The lessee is required to nake five lease payments of £27,500, starting with Oct 1, 20X8. The fair value of the asset on Oct 1, 20X8 is £113,500. C Ltd incurs initial lirect costs of £421 and the rate of interest implicit in the lease is 12%. At the end of the lease term, ownership of the asset will remain with C Ltd, the asset is expected to have come to the end of its economic life and to have a residual scrap value of £5,100. Provide two reasons for why this lease is a finance lease and not an operating lease. ) Calculate the net investment in the lease at commencement. i) Prepare lessor's journal entries for the year ending Sep. 30th, 20X9.

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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Smart Ltd negotiated a lease on the following terms: the lease had a 3 year term; the purchase price of the new equipment was R41 250; there were 3 annual payments of R15 000 payable in advance; and Smart Ltd was able to borrow at 10% per annum. The balance sheet liability figure at the end of the second year would be Select one: O a. R13 750 O b. R15 000 O c. R12 250 O d. R15 000
am. 90.
me.1
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BNM Itd. Acquired on asset of Rs. 440,000 through a finance lease agreement pn 1-1-2018 with no residual value. The lease term is five years with annual lease rentals of Rs. 100,000 payable at the start of each year. The implicit rate of interest is 10%. Calculate: a. Gross investment in lease b. Net investment in lease C. Unearned finance income d. Lease amortization schedule