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

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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

MWANJOMBE Limited entered into a four year lease on 1 January 2022 for a machine. Rentals are TZS 20,000,000 p.a payable in advance. MWANJOMBE Limited incurs initial direct costs of TZS 5,000,000. The rate of interest implicit in the lease is 10%. Machine has a useful life of five years. REQUIRED Prepare extracts from financial statements for the year ended 31st December 2022 - 2025
The Arcade Company entered into a 10 year lease under which it made payments of R26 720 annually in advance.Arcade's borrowing rate was 10% per annum. The present value of the land was R125 000 and that of the buildings wasR125 000. The value of the land at the end of 10 years was R167 500 and the value of the buildings was R32 500. What isthe present value of the operating lease?Select one:a.None of the given options is correctb.R125 000c.R64 571d.R48 188
5. On June 30, year 1, Menchen, Inc. leased equipment from Davis Leasing. The lease agreement calls for Menchen to make semiannual lease payments of $ 400, 500 over a seven- year lease term, on June 30 and December 31. This is also the assets useful life. The first payment was due immediately on June 30, year 1. The interest rate used is the incremental borrowing rate of 11%. The cost of the asset to Davis was $ 4,051,891 using a factor of 10.11708. a. using an amortization table what amount would Davis show on its balance sheet on December 31, year 1? b. what amount would Davis show on its income statement on December 31,year 1?
*see attached What is the total unearned interest income? a. 3,052,705b. 2,652,705c. 2,252,705d. 6,000,000
Question 11. C Ltd has a fiscal year end of Sep. 30th. On Oct. 1, 20X8 C Ltd leases an asset to a lessee for a term of five years. The lessee is required to make five lease payments of £27,500, starting with Oct 1, 20X8. The fair value of the asset on Oct 1, 20X8 is £113,500. C Ltd incurs initial direct costs of £421 and the rate of interest implicit in the lease is 12%. At the end of the lease term, ownership of the asset will remain with C Ltd, the asset is expected to have come to the end of its economic life and to have a residual scrap value of £5,100. i) Provide two reasons for why this lease is a finance lease and not an operating lease. ii) Calculate the net investment in the lease at commencement. iii) Prepare lessor's journal entries for the year ending Sep. 30th, 20X9.
On 1 March 2020,the company entered into a lease agreement in order to lease a manufacturing machine with a costprice of R250 000 (VAT inclusive). The period of the lease is five years, and the useful life of the machinery is estimatedat six years. The following is an extract from the lease agreement:4.1.1 Ownership of the machinery will be transferred to the Lessee at the end of the lease.4.1.2 Should the Lessee cancel the lease, the Lessor’s losses will be borne by the Lessee.Monthly instalments are payable in arrears and amount to R5 947 (VAT inclusive). The company used themanufacturing machine for a qualifying purpose. The company is a registered VAT vendor.Required:Provide the deferred tax movement per the balance sheet method for the lease agreement for the financial year ending31 December 2021. Clearly indicate whether the movement represents an income or an expense. Note:- Show all calculations, marks are awarded for calculations.- You may round off to the nearest Rand.
Helpful plc is a finance company. It purchased computer equipment for R78 500 and leased it to Chatroom Ltd under a three year lease with three payments of R29 000 payable annually in advance. Chatroom Ltd agreed to pay R830, which represented the cost of setting up the lease. At the end of the first year, the balance sheet reported a balance of R55 363. The implicit rate of interest is 10%. What amount will be recognised in the Helpful plc income statement as interest in the second year? Select one: a. R5 536 b. R2 636 c. R830 d. R29 000
The Arcade Company entered into a 10 year lease under which it made payments of R26 720 annually in advance. Arcade's borrowing rate was 10% per annum. The present value of the land was R125 000 and that of the buildings was R125 000. The value of the land at the end of 10 years was R167 500 and the value of the buildings was R32 500. The land would be classified as Select one: O a. a finance lease O b. an accounting lease O c. a financial lease O d. an operating lease
On March 31, 20x1, TRUST CO. (customer)enters into a 4 -year lease of equipment with FAITH CO. ( Supplier). The annual rent is P220,000, payable at the end of each year . The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee's incremental borrowing rate is 12%. The relevant value factors are as follows: PV of an ordinary annuity of P1@10%, n=4 ...... 3.16987 PV of an ordinary annuity of P1@12%, n=4 ....... 3.03735 How much is the lease liability to be recognized by TRUST CO. on initial recognition? A. P880,000 B. P697,371 C. P523,029 D. P702,345
A Limited leased a fleet of trucks for a four year period, with a minimum payment of $30,000 per annum. The interest rate available to A Limited is 5% per annum. The fleet of trucks has a residual value of $45,000, the price at which A Ltd can purchase the fleet at the end of the lease. What is the present value of the lease of the fleet of trucks? Select one or more: O a. $243,401 O b. $150,000 O c. $106,380 O d. $143,402
me.1
ABC Company leases out an equipment under direct finance lease. There is no residual value nor bargain purchase option. The entity wishes to earn 8% on a 5-year lease of equipment costing P3,234,000. First annual lease payment is payable immediately on the contract date on January 1, Year 1. How much is the interest revenue for Year 1? (use three decimal places for the PV factors) P198,720 P258,720 P154,620 none