**Lease Agreement Analysis: Timmer Company**Timmer Company has entered into a lease agreement starting January 1, 2016, to lease equipment from Landau Company. Key details of the lease are as follows:- **Lease Terms**: - The lease is non-cancelable with a 5-year term. - Annual rent is $83,222.92, payable at the end of each year. - Landau is provided with a 12% return on its net investment by Timmer. - Timmer is responsible for additional costs annually. In 2016, this included: - Insurance: $3,760 - Property Taxes: $5,440 - In 2017, these costs were: - Insurance: $3,100 - Property Taxes: $5,330 - No renewal or purchase options at the end of the lease term.- **Equipment Valuation**: - Fair value: $300,000 - Economic life: 5 years - Residual value: $0- **Interest Rate and Depreciation**: - Timmer's borrowing rate: 16% - Depreciation method: Straight-line, based on similar equipment.**Requirements**:1. **Asset and Liability Calculation**: - Determine the value of the asset and liability for Timmer at the start of the lease.2. **Lease Payments and Interest Expense Table**: - Create a table summarizing each lease payment and related interest expenses.3. **Journal Entries**: - Prepare journal entries for the fiscal years 2016 and 2017.4. **Partial Balance Sheet Preparation**: - Prepare a partial balance sheet in relation to the lease as of December 31, 2016. - Classify the capital lease obligation into current and non-current portions using present value adjustments.

Journal entries refer to the systematic documentation of the financial transactions of a company in…

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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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Baltimore Ltd entered into a contract to acquire a vehicle from BryanstonMotors. The lease term as well as the economic life of the vehicle is fiveyears. The cash price of the vehicle is R180 000. The lease liability is payablein annual instalments of R45 082 from 1 May 2019. The interest rate implicit in the lease is 8%. Baltimore Ltd paid attorney fees of R800 in respect of the lease agreement. It is the accounting policy of Baltimore Ltd to depreciate vehicles over five years on a straight‐ line basis.Required:Q.1.2.1 In terms of IFRS16 – Leases briefly discuss why the above contractis a lease.Q.1.2.2 Complete the amortisation schedule for the lease of the vehicle.Round all amounts to the nearest rand.Q.1.2.3 Calculate the depreciation for the reporting period ending31 March 2020 in the books of the lessee. All answers must comply with the requirements of International FinancialReporting Standards (IFRS), in particular IFRS16 – Leases.All calculations must be shown as marks will be…
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On 1 January 2017, Celia enters into an 8-year lease contract for 6,000 square meters of office space. Annual lease payment is P180,000 payable on 31 December each year. On 1 January 2021, Celia and the property owner agree to amend the original lease for the remaining 4 years to include additional 8,000 square meters of office space. As a result, the lease payment increases to P390,000 per year . Celia's incremental borrowing rate is 5% in 2017 and 6% in 2021. How much should he recognized as total depreciation expense for the year ended 2021? how much should he recognized as total interest expense for the year ended 2021? how much should be recognized as interest expense for the year ended 2020 relating to the lease of 6,000 square meter of office space? how much is the amount of right-of-use asset to be recognized on 1 January 2017?
Identify the differences between a Finance Lease and an Operating Lease 5.2. hijk Ltd leases an asset as a lessee. The lease agreement is for 6 years. Lease instalments of R145 545 made at the beginning of the period and interest rate is 9%. The commencement of the lease is 1 April 2021. Asset is depreciated over 4 years. The tax rate is 28%. Lease payments are allowed as a deduction when paid. Profit before tax is R600 000 Journalise the transactions for the year ended 31 December 2021 (Journal narrations are required)
1. Doris Smith recorded a capital lease at PV $350,640 on January 1, 2017. The interest rate is 11%. The leased asset has a life of 5 years. Smith made the first lease payment of $57,051 on 1/1/17. The lease requires 6 annual payments. A. Why is this a capital lease? B. Prepare the amortization schedule for the first 3 years for the lessee lessor
RENTER entered into the contract on 1 January 2017 for 5 years, annual rental payments are P100,000 in arrears (that is, 31 December each year) and at the end of the lease term, the machine will be returned back to the lessor. RENTER also incurred direct cost of P5,550 as direct cost. The economic life of a machine is 10 years. Use the discount rate of 3%. How much is the depreciation annually related to the asset? What is the journal entry for January 1, 2017?
WITH SOLUTION/COMPUTATION 53. Neal Corp. entered into a nine-year lease on a warehouse on December 31, 2019. Lease payments of P52,000, which includes payments for non-lease component of P2,000 (at stand-alone selling price), are due annually, beginning on December 31, 2019, and every December 31 thereafter. Neal does not know the interest rate implicit in the lease; Neal’s incremental borrowing rate is 9%. What amount should Neal report as lease liability at December 31, 2019?a. 280,000 b. 291,200 c. 450,000 d. 468,000
sharad
On 1 January 2020, the company had entered into a five-year lease agreement for an office space with GP S.A.O.G. The company must make lease payments of OMR 50,000 annually at the beginning of each year. The present value of the total lease payments is OMR 208,500. The cost of capital used is 10%. What amount should be recognised in right-to-use-asset as per IFRS 16 in the books of the lessee. O a. OMR 158,500. O b. OMR 208,500. OC. OMR 250,000. O d. OMR 25,000.
Vaibh
inducement to enter to the lease, the lessor granted Relief Co. the first two months of the lease as rent-free. Requirement: a. Provide all the journal entries over the lease term. b. Determine the amount(s) to be presented in Relief Co.'s Dec. 31, 20x2 statement of financial position.
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

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