Question 4 Ignore VAT Assume a fair interest rate of 13% EMT Ltd (EMT) is a company which operates in the medical field. EMT has a financial year end of 30 June. EMT purchased a machine from Medinc Ltd (Medinc). The machine was purchased on the 1 August 2020 but was available for use on the 1 September 2020. The agreement between EMT and Medinc stated that the machine will be delivered on 1 August 2020, but payment will be made on 31 July 2021. This agreement was created especially for EMT and is beyond normal credit terms. On the 31 July 2021, EMT is obligated to pay R565,000 to Medinc. The machine has a useful life of 10 years and a residual value of R50,000. You are required to: 1. Prepare all of the general journal entries that should be processed in the accounting records of EMT Ltd for the years ended 30 June 2021 and 30 June 2022. Dates are required.
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- Problem 6-4 (IAA) Gullible Company is a dealer in equipment. On December 31, 2020, the entity sold an equipment in exchange for a noninterest bearing note requiring five annual payments of P500,000. The first payment was made on December 31, 2021. The market interest for similar notes was 8%. The relevant present value factors are: PV of 1 at 8% for 5 periods PV of an ordinary annuity of 1 at 8% for 5 periods 0.68 3.99 Required: 1. Prepare journal entries for 2020 and 2021. 2. Determine the carrying amount of the note receivable on December 31, 2021. 8. Determine the interest income for 2022.Question 5 Telephone Limited signed a contract with Machinery Leasing Company at 1st January 2020 to lease a machine. The agreement consists in 10 equal annual payments of $300,000 at the beginning of each year with an interest rate of 15%. The yearly rental payment includes $30,000 of executory costs related to insurance on the machine. The executory costs of $30,000 are paid to the lessor each year. There is an option to purchase the machine at the end of the lease term for $50,000. The machine has an estimated useful life of 14 years and a guaranteed residual value of $20,000. Both companies adopt straight-line depreciation method for all items of PPE. Consider a PVIF (n=10, i=15%) of 0.2472 and PVIFA (n=10, i=15%) of 5.0188. The balance day for Telephone Limited and Machinery Leasing Company is 31 of December. Required (Round all numbers to the nearest dollar) a) Discuss the nature of this lease to Telephone Limited. b) Discuss the nature of this lease to Machinery Leasing…Question 6 On Octobel 31, 2020, Tarling Company neguiated a one year 100.000-eanc loan kon a f n bank at an intert rate of 3% per yea tont paymen e mae s on Odb 31, nd peincipal wilf be repaid on October 31 2021 Tarling prepares US dolla financial tatoments and han a Deconber 31 year end Date ranc Rate October 31, 2020 30 49 December 31, 2020 S0 55 October 31, 2021 50 65 Required: Assuming the above information Prepare all jounal entries related to thi foreign orency bonowing
- XI. Direct Finance Lease – Lessee (PFRS 16)Problem 13. SMC Inc. leased a machine on January 1,2011 to SM Inc. with the following pertinentinformation:Annual rental payable at the beginning of each year P500,000Lease term 5 yearsUseful life of machine 6 yearsFair value of machine on January 1,2011 2,400,000Incremental borrowing rate of lessee 14%Implicit interest rate of lessor known to lessee 12%Bargain purchase option at the end of lease term 100,000Residual value of the machine 200,000Initial direct cost incurred by lessee 300,000Prepaid bonus paid by lessee 400,000Estimated restoration cost in which lessee has contractual obligation 1,000,000Required: Based on your audit, determine the following: ____________1. Initial amount recognized as right of use asset ____________2. Initial amount recognized as leased liability ____________3. Depreciation Expense in 2011 assuming cost model ____________4. Book value of right of use asset on December 31, 2012 ____________5. Current Lease…Question 14 Pebworth Co entered into a contract to acquire the right to use an item of plant for a period of three years from 1 April 2022. The contract meets the definition of a lease under IFRS 16 Leases. The present value of the future lease payments on commencement of the lease was £15,462,000 which is also the initial carrying amount of the right-of-use asset. Pebworth Co will also make three rental payments of £6 million per annum which are due to be paid in arrears on 31 March each year. The useful life of the plant is deemed to be five years. There is no option to buy the asset at the end of the lease term. The interest rate implicit in the lease is 8% per annum. Required: What is the total charge to profit or loss in respect of this lease at 31 March 2023? Question 15 Drexler acquire an item of plant on 1 October 2021 at a cost of £500,000. It has a useful life of five years (straight-line depreciation) and an estimated residual value of 10% of its historical cost or current…Problem 7 Aespa Company leased equipment from Naevis Company on July 1, 2021 for eight-year period expiring June 30, 2029. Equal payments under the lease are P600,000 and are due on July 1 of each year. The first payment was made on July 1, 2021. The rate of interest contemplated by Aespa and Naevis is 10%. The cash selling price of the equipment is P3,520,000 and the carrying amount is P2,800,000. The lease Is appropriately recorded as a sales type lease. 1. What amount of Gross Income on sale should be recorded for the year? a. 600,000 b. 720,000 c. 360,000 d. 300,000 2. What amount of interest revenue should be recorded for the year ended December 31, 2021? a. 292,000 b. 146,000 c. 352,000 d. 176,000
- Problem 2 At the beginning of the current year BTS Company entered into a 10-year lease for an equipment. The entity accounted for the acquisition at the present value of lease payment of P4,900,000 which included a P200,000 residual value guarantee. At the end of the lease, the asset will revert back to the lessor. It is estirnated that the asset's fair value at the end of the 12-year useful life will be P100,000. The entity regularly used the straight-line depreciation on simillar equipment. What amount should be recognized as depreciation expense of the right of use asset for the current year?Question 3 On 30 June 2022, Happy Ltd purchased machinery for its fair value of $41 600 and then leased it to Laugh Ltd. Laugh Ltd incurred $220, and Happy Ltd incurred $797, in costs to negotiate the lease agreement. The machine is expected to have an economic life of 5 years, after which time it will have a residual value of $2500. The lease agreement details are as follows. Length of lease 4 years Commencement date 30 June 2022 Annual lease payment, payable 30 June each year commencing 30 June 2022 $12 000 Residual value at the end of the lease term $10 000 Residual value guarantee by lessee $8 000 Interest rate implicit in the lease 9% All insurance and maintenance costs are paid by Happy Ltd and amount to $2 000 per year and will be reimbursed by Laugh Ltd by being included in the annual lease payment of $12 000. The lease has been classified as a finance lease by Happy Ltd. The machinery will be depreciated on a straight-line basis. It is…Problem 11-5 On January 1,2020, Madelle Company entered into a lease for floor space with the following information. Floor space 5,000 square meters Annual rental payable at the end of each year 200,000 Lease term 5 years Implicit in the elase 10% Present value of an ordinary annuity of 1 for 10% at 5 periods 3.7908 On Jnaury 1, 2022, Madelle Company and the lessor agreed to amend the original terms of the lease with the following information. Floor space 3,750 square meters Annual rental payable at the end of each year 150,000 Implicit in the elase…
- Offsetting 5. Entity A has an account receivable of P200,000 from Entity B. In addition, Entity A also has an account payable of P160,000 to Entity B. The account receivable is due in 30 days while the account payable is due in 90 days. Entity A intends to settle first the account receivable. If Entity A has a legal right of set- off, how much account receivable will be shown in its statement of financial position? c. 160,000 d. a or b a. 200,000 b. 40,000Problem 21-02 b-f On January 1, 2020, Bridgeport Company contracts to lease equipment for 5 years, agreeing to make a payment of $145,088 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $605,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Bridgeport’s incremental borrowing rate is 6%, and the implicit rate in the lease is 10%, which is known by Bridgeport. Title to the equipment transfers to Bridgeport at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. What amounts will appear on the lessee’s December 31, 2020, balance sheet relative to the lease contract? BRIDGEPORT COMPANYBalance Sheet (Partial) December 31, 2020 Assets select an opening section name Current Assets Current Liabilities Intangible Assets Long-term Investments Noncurrent Liabilities Property, Plant and Equipment…Problem 21-02 b-f On January 1, 2020, Bridgeport Company contracts to lease equipment for 5 years, agreeing to make a payment of $145,088 at the beginning of each year, starting January 1, 2020. The leased equipment is to be capitalized at $605,000. The asset is to be amortized on a double-declining-balance basis, and the obligation is to be reduced on an effective-interest basis. Bridgeport’s incremental borrowing rate is 6%, and the implicit rate in the lease is 10%, which is known by Bridgeport. Title to the equipment transfers to Bridgeport at the end of the lease. The asset has an estimated useful life of 5 years and no residual value. Prepare the journal entries that Bridgeport should record on January 1, 2020 Date Account Titles and Explanation Debit Credit January 1, 2020 enter an account title To record the lease enter a debit amount enter a credit amount enter an account title To record the lease…