11. On 1 July 2020, Sami Ltd leased a machine from Jimmy Ltd.The machine cost Jimmy Ltd OMR1,300,000 to manufactureand had a fair value of OMR1,541,090 on 1 July 2020. The leaseagreement contained the following provisions:Lease term|4 years|Annual rental payment, in advance on 1 July each year OMR 415,000|Residual value at end of the lease termResidual guaranteed by lesseeInterest rate implicit in leaseThe lease is cancellable only with the permission of the lessor.OMR 150,000nil8%The expected useful life of the machine is 6 years. Sami Ltdintends to return the machine to the lessor at the end of the leaseterm. Included in the annual rental payment is an amount ofOMR15,000 to cover the costs of maintenance and insurance paidfor by the lessor.RequiredA. Prepare the lease payment schedule for the lessee (show allworkings); andB. Prepare the lease receipt schedule for the lessor (show allworkings)

A. Lease payment by lessee: Cost of lease= Present value of lessee rent (-) present value of tax…

Answered: Required A. Prepare the lease payment…

Required A. Prepare the lease payment schedule for the lessee (show all workings); and B. Prepare the lease receipt schedule for the lessor (show all workings)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: For the lessor to account for a lease as a sales-type lease, the lease must meet:

A: A sales-type lease assumes that the lease serves as a transfer of property to the customer, or…

Q: ent Attempt in Progress ura Leasing Company signs an agreement on January 1, 2020, to lease…

A: Lease - Contracts or documents that transfer property from one party to another for a predetermined…

Q: Describe the accounting procedures that must be followed by a lessee when employing the operational…

A: The Question is about the accounting procedures that must be followed by a lessee when employing the…

Q: Crystal Corporation recorded a lease payment as follows: Dr. Rent expense Cr. Cash Crystal…

A: Main types of leases are: 1. Operating lease 2. Finance lease. -----------------------------------…

Q: Describe the accounting and reporting for special features of lease arrangements.

A: Special features of lease arrangements: - Residual type - Sale type leases - Bargain purchase option…

Q: If, as part of the accounting for a lease, the lessee debits an asset and credits a liability,…

A: Assets have debit balance while liabilities and equity have credit balance. A lease is a contractual…

Q: Determine Lease Revenue?

A: Lease: Leases are agreements in which the proprietor of the asset permits another party to utilize…

Q: Explain the Summary of the Lease Uncertainties.

A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period…

Q: Cheyenne Inc. was incorporated in 2024 to operate as a computer software service firm, with an…

A: Cheyenne Inc. needs to record its new computer lease as a finance lease in its accounting records.…

Q: Which of the following payment/s is/are included along with lease liability? a- All of them b-…

A: According to IAS 17, LEASES, There are two types of Leases: 1. Finance Lease 2. Operating Lease

Q: compare the disclosures relating to fi nance and operating leases;

A: The IAS 17 defines the disclosures required by operating and financing lease and the accounting…

Q: Where can we obtain reliable guidelines on IFRS lease accounting?

A: It is dealing with where can we obtain reliable guidelines on IFRS lease accounting

Q: At the beginning of a Type B lease, the lessor will record what asset and liability, if any?

A: Lease:An agreement of contract that is made to transfer the right to utlize the resources for a…

Q: Explain the accounting for operating leases.

A: The accounting for an operating lease assumes that the lessor owns the leased asset, and the lessee…

Q: Justify the effect of additional payments on lease accounting, such as non-lease payments, initial…

A: This question argues about the impact on lease accounting of non-lease payments, initial direct…

Q: when evaluating a tenant and a lease proposal, the owner considers it?

A: Lease is an agreement where landlord and tenant agrees to certain terms and conditions. In this…

Q: Explain the impact on lease accounting of other payments, including nonleasepayments, initial direct…

A: Uncertainties in lease transactions: There are several issues with respect to lease transactions…

Q: What are the two subsequent measurement for financial asset? Who are part of the contract of lease

A: The financial assets is the kind of liquid assets that gets its value from the right of the contract…

Q: Summarize the GAAP versus IFRS existing and pending (if any) requirements for accounting for leases.…

A: GAAP is primarily used in the United States, while IFRS is used in over 110 countries around the…

Q: Describe the accounting for leases by lessors.

A: There are mainly 2 types of lease: 1. Finance and 2. Operating Finance lease is a lease where…

Q: Explain Nonlease Components of Lease Payments.

A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period…

Q: Describe how to record lease expense.

A: A lease for capital is a lease where the lessee recognizes the underlying asset as if it acquires…

Q: Explain the Remeasurement of the Lease Liability...

A: Lease Liability: In order to determine the lease liability, lease payment information should be…

Q: Identify the lease classifications for lessors and the criteriathat must be met for each…

Q: At the beginning of a Type B lease, the lessee will record what asset and liability, if any?

A: Type B lease implies to the lease in which insignificant portion of the useful life of the asset is…

Q: In accounting for a finance lease/ Sale-type lease, how are the lessee's and lessor's income…

A: The income statements of the lessor and lessee are affected in finance leases and sale-type leases.…

Q: Describe about what is the lessor, lessee and lease contract.

A: Lease Contract: Lease is a contractual agreement whereby the right to use an asset for a…

Q: Identify the parties involved in a novated lease.

A: Individual or the company can obtain the assets, or any property on lease. Even the party can…

Q: Describe the accounting for leases by lessees.

A: Finance lease is a lease where all the risks and the rewards are transferred from the lessor to the…

Q: Discuss the factors that impact on whether an agreement with a supplier is considered to be a…

A: An agreement with supplier : An agreement with the supplier is a agreement between the two persons,…

Q: Distinguish between a Type A lease and a Type B lease.

A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of…

Q: Explain the accounting involved in applying the operating lease method by a lessor.

A: Operational lease method: A process of using the asset for a rental payable in instalments or in…

Q: Describe the lessee's accounting for sale-leaseback transactions.

A: Meaning:

Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

11. On 1 July 2020, Sami Ltd leased a machine from Jimmy Ltd.
The machine cost Jimmy Ltd OMR1,300,000 to manufacture
and had a fair value of OMR1,541,090 on 1 July 2020. The lease
agreement contained the following provisions:
Lease term
|4 years
|Annual rental payment, in advance on 1 July each year OMR 415,000|
Residual value at end of the lease term
Residual guaranteed by lessee
Interest rate implicit in lease
The lease is cancellable only with the permission of the lessor.
OMR 150,000
nil
8%
The expected useful life of the machine is 6 years. Sami Ltd
intends to return the machine to the lessor at the end of the lease
term. Included in the annual rental payment is an amount of
OMR15,000 to cover the costs of maintenance and insurance paid
for by the lessor.
Required
A. Prepare the lease payment schedule for the lessee (show all
workings); and
B. Prepare the lease receipt schedule for the lessor (show all
workings)

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Describe the lessor's accounting for a direct financing lease.
At the beginning of an operating lease, the lessor will record what asset or assets, if any?
Define each of these terms: (1) sale and leaseback, (2) operating lease, and (3) financial,or capital, lease.
Distinguish between a financing lease and an operational lease from the lessee's standpoint.
Where does the operating lease liability reported?
Which of the following statements is correct related to lease? a. The leased asset is depreciated over the asset's useful life or lease term whichever is higher. b. The leased asset is depreciated over the asset's useful life. c. The leased asset is recorded using the higher amount between fair value of the asset and present value of the minimum lease payments. d. Under IFRS 16 a lease is defined as ‘a contract that conveys the right to use an asset for a period of time in exchange for consideration'.
What is lease rent and lease income? Do I have to record initial direct costs when I record payment? Do I need to derecognize the asset?
Under IFRS 16, lessors are required to account for lease receipts from operation leases as a. Income, on a straight-line basis over the lease term b. Revenue, on a reducing balance basis over the lease term c. Revenue, at the end of lease term d. Income, on inception date of the lease
Explain the differences in revenue recognition for the lessor in a sales-type lease, a direct financing lease, and an operating lease.
Describe how to record lease revenue.
c) A lessor expects some benefits from a lease contract. Explain some benefits.