Viraj Limited wishes to obtain a machine costing t45 lakhs by way of lease. The eftfective life of the machine is 14years, but the company requires it only for the first 5 years. It enters into an agreement with Jhalak Ltd., for a leaserental for t4.5 lakhs p.o. payabie in arrears and the implicit rate of interest is 15%. The chief accountant of VirajLimited is not sure about the treatment of these lease rentali and seeks your advise.Solution

Viraj Limited obtains a machine costing $ 45 Lakhs by way of lease, The life of asset is 14 years…

Answered: years, but the company requires it only…

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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Similar questions

Carlton is the office manager for Cargill Limited. He just signed a 4-year leasing contract on some new production equipment. The terms of the lease require monthly payments of $9,000. If the current interest rates are 3.3% compounded semi-annually, what liability amount should be recorded on the company's balance sheet on the day the contract was signed? Round your answer to 2 decimal places.
At the beginning of the year, Cazenovia, Inc. Entered into a five-year lease for equipment that was valued at $95,000. The company will be required to make annual lease payments of $22,000 for five years at year-end. The implicit interest rate is 5% and the company classified the lease as a finance lease. Required What is the balance sheet value of the lease asset and the lease liability? Why was the lease categorized as a finance lease? How much is interest expense in the first year? What is the reduction in the lease liability in the first year? What is the total expense if straight-line amortization is used for the leased asset?
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
rean Logistics company enters into an operating lease contract with a UK Company specialize in warehousing to rent the warehouse for 5 years (60 months). for every 12 months period, the lease payment will increase 5%. So if the 1st until 12th lease period the monthly payment at CU 1,014,000, at lease period 13th to 24th, the monthly lease payment will be CU 1,064,700. The 5% increase monthly lease payment will change every 12 month. The Incremental borrowing rate at 10.20% pa Based on this issues, according to IFRS 16 for lease, please create monthly the amortization lease table that includes the interest amount, principal amount, and depreciation amount for the next 60 operating lease period.
Please help me ......
Able Inc. sells a new product with a 2-year warranty. The company estimates that during the two years, the costs and related probabilities are: Year 1: $10,000 (20 %) and $20,000 (80 %), Year 2 $15,000 (50 %) and $25,000 (50 %). The company's effective interest rate is 4%. Assuming the warranty costs are settled at the end of Years 1 and 2, calculate the estimated warranty liability using the expected cash flow method.
The company has the opportunity to purchase production equipment on lease terms. The value of the equipment is EUR 12000. The lease term is 3 years. The first installment makes up 15% of the value, the interest rate is 5.5% per annum. Calculate leasing one the amount of the payments if the lease payments are made: (a) at the end of each quarter; b) at the beginning of each month. Compile a leasing payment scheme with a quarterly payments.
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Island Water Taxi has decided to lease another boat for four years rather than finance the purchase of the boat at an interest rate of 8.7% compounded monthly. It has set up a long-term lease liability of $55.000. What is the lease payment at the beginning of each month? (Do not round Intermedlate calculations and round your final answer to 2 declmal places.) Lease payment %$4
Marin Fashion Company enters into a lease arrangement with Highpoint Leasing for 5 years. Marin agrees to pay 7% of its net sales as a variable lease payment. Marin does not pay any fixed payments. Marin is a highly successful company that has achieved over $1,200,000 in net sales over the last 7 years. Both Marin and Highpoint forecast that net sales will be a much greater amount than $1,200,000 in subsequent years. As a result, it is highly certain that Marin will make payments of at least $84,000 ($1,200,000 × 7%) each year.What is the lease payment amount Marin should use to record its right-of-use asset? Lease payment $enter the lease payment in dollars
Kyle secured a lease on a machine by paying $2,000 as a down payment and then $700 at the beginning of every month for 5 years. The lease rate was 5.75% compounded monthly. a. What was the principal amount of the lease? Round to the nearest cent b. What was the cost of the machine? Round to the nearest cent c. What was the amount of interest paid over the term of the lease? Round to the nearest cent
King Cones leased ice cream-making equipment from Ace Leasing. Ace earns interest under such arrangements at a 4% annual rate. The lease term is five-months with monthly payments of $13,500 due at the end of each month. King Cones elected the short-term lease option. What is the effect of the lease on King Cones' earnings during the five-month term (ignore taxes)? (Enter your answer as a positive value.)

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