Question 3 COE Limited is a lessee and has entered into a non-cancellable lease agreement for an equipment on 1 January 2020. The following data is relevant: 1. The lease term is 6 years. Lease payments is $700,000 per annum, payable on 1 January of each year, with the first payment on 1 January 2020. 2. The equipment has a useful life of 8 years with no residual value. 3. COE Limited depreciates similar equipment on a straight-line basis. 4. The interest rate implicit in the lease is 5% per annum. Required (Answers round to the nearest dollar): a. Calculate the present value of the lease payments on 1 January 2020. b. Prepare the journal entries related to the lease agreement in 2020.

Question 3 COE Limited is a lessee and has entered into a non-cancellable lease agreement for an equipment on 1 January 2020. The following data is relevant: 1. The lease term is 6 years. Lease payments is $700,000 per annum, payable on 1 January of each year, with the first payment on 1 January 2020. 2. The equipment has a useful life of 8 years with no residual value. 3. COE Limited depreciates similar equipment on a straight-line basis. 4. The interest rate implicit in the lease is 5% per annum. Required (Answers round to the nearest dollar): a. Calculate the present value of the lease payments on 1 January 2020. b. Prepare the journal entries related to the lease agreement in 2020.

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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Current Attempt in Progress Windsor Leasing Group signs an agreement on January 1, 2022, to lease equipment to Cole plc. The following information relates to this agreement. 1. The term of the non-cancelable lease is 6 years with no renewal option. The equipment has an estimated economiclife of 6 years. 2. The cost of the asset to the lessor is £275,000. The fair value of the asset at January 1, 2022, is £275,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of £24,335, none of which is guaranteed. 4. The agreement requires equal annual rental payments, beginning on January 1, 2022. 5. Collectibility of the lease payments by Windsor is probable. Click here to view factor tables. (a) Assuming the lessor desires an 8% rate of return on its investment, calculate the amount of the annual rental payment required. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and…