Question 4 United Ltd leases artificial-intelligent robots which work efficiently and mechanically in response to the environment without the need of receiving instructions to a variety of business customers under long-term direct finance leases. Dickens Ltd leased a robot from United on Dec 31, 2020. The lease contract specified the first annual lease payment of $10,806 was payable on Jan 1, 2021, the commencement of the lease, and each Jan 1 through 2023, with an option to extend for another 2 years at $12,000 per year. Dickens incurred initial direct costs of $4,000 paid to real estate agent. As incentive to take up the lease, United paid Dickens $2,500 to compensate Dickens for the real estate agent's fee. At the start of the lease, Dickens was not reasonably certain to exercise the extension option and was not aware of the implicit rate of the lease, but its incremental borrowing rate is 5% per annum. Dickens depreciated ROU asset using straight-line method. Required 1. What is the lease payable amount after the first lease payment made on Jan 1, 2021, the commencement of the lease? (Note: Students are expected to use financial calculator/EXCEL and your answer should show the inputs/output of the financial calculator/EXCEL. Answers to be rounded to the nearest two decimal places) 2. Prepare the necessary journal entries pertaining to the lease by the lessee in 2022.
Question 4 United Ltd leases artificial-intelligent robots which work efficiently and mechanically in response to the environment without the need of receiving instructions to a variety of business customers under long-term direct finance leases. Dickens Ltd leased a robot from United on Dec 31, 2020. The lease contract specified the first annual lease payment of $10,806 was payable on Jan 1, 2021, the commencement of the lease, and each Jan 1 through 2023, with an option to extend for another 2 years at $12,000 per year. Dickens incurred initial direct costs of $4,000 paid to real estate agent. As incentive to take up the lease, United paid Dickens $2,500 to compensate Dickens for the real estate agent's fee. At the start of the lease, Dickens was not reasonably certain to exercise the extension option and was not aware of the implicit rate of the lease, but its incremental borrowing rate is 5% per annum. Dickens depreciated ROU asset using straight-line method. Required 1. What is the lease payable amount after the first lease payment made on Jan 1, 2021, the commencement of the lease? (Note: Students are expected to use financial calculator/EXCEL and your answer should show the inputs/output of the financial calculator/EXCEL. Answers to be rounded to the nearest two decimal places) 2. Prepare the necessary journal entries pertaining to the lease by the lessee in 2022.
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter10: Long-term Liabilities
Section: Chapter Questions
Problem 10.9E: Leased Assets Koffman and Sons signed a four-year lease for a forklift on January 1, 2016. Annual...
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Transcribed Image Text:Question 4
United Ltd leases artificial-intelligent robots which work efficiently and mechanically in
response to the environment without the need of receiving instructions to a variety of business
customers under long-term direct finance leases.
Dickens Ltd leased a robot from United on Dec 31, 2020. The lease contract specified the first
annual lease payment of $10,806 was payable on Jan 1, 2021, the commencement of the lease,
and each Jan 1 through 2023, with an option to extend for another 2 years at $12,000 per year.
Dickens incurred initial direct costs of $4,000 paid to real estate agent. As incentive to take up
the lease, United paid Dickens $2,500 to compensate Dickens for the real estate agent's fee.
At the start of the lease, Dickens was not reasonably certain to exercise the extension option
and was not aware of the implicit rate of the lease, but its incremental borrowing rate is 5% per
annum. Dickens depreciated ROU asset using straight-line method.
Required
1. What is the lease payable amount after the first lease payment made on Jan 1, 2021, the
commencement of the lease? (Note: Students are expected to use financial
calculator/EXCEL and your answer should show the inputs/output of the financial
calculator/EXCEL. Answers to be rounded to the nearest two decimal places)
2.
Prepare the necessary journal entries pertaining to the lease by the lessee in 2022.
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