ABC Enterprises entered into a five-year lease agreement on 1 November 2020, paying £10,975 per annum, commencing on 31 October 2021. The present value of the lease payments was £45,000 and the interest rate implicit to the lease was 7% What is the amount to be shown within non-current liabilities at 31 October 2021? Show your calculations.

ABC Enterprises entered into a five-year lease agreement on 1 November 2020, paying £10,975 per annum, commencing on 31 October 2021. The present value of the lease payments was £45,000 and the interest rate implicit to the lease was 7% What is the amount to be shown within non-current liabilities at 31 October 2021? Show your calculations.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter7: Financial Activities

Section: Chapter Questions

Problem 1AIC

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ABC Enterprises entered into a five-year lease agreement on 1 November 2020, paying£10,975 per annum, commencing on 31 October 2021. The present value of the lease payments was £45,000 and the interest rate implicit to the lease was 7% What is the amount to be shown within non-current liabilities at 31 October 2021? Show your calculations.
On 1 July 2019, Fisher Ltd decides to lease a cargo ship from XFinance Ltd. The term of the lease is 20 years. The implicit interest rate in the lease is 10 per cent. The fair value of the cargo ship at the commencement of the lease is $2,215,560. The lease is non-cancellable, and requires a lease payment of $300,000 on inception of the lease (on 1 July 2019) and lease payments of $250,000 on 30 June each year (starting 30 June 2020). Included within the $250,000 lease payments is an amount of $25,000 representing payment to the lessor for the insurance and maintenance of the cargo ship. There is no residual payment required. Annuity factor, n=20; r = 10% is 8.5136. a) Prove that the interest rate implicit in the lease is 10 per cent.
On 1 July 2019, Fisher Ltd decides to lease a cargo ship from XFinance Ltd. The term of the lease is 20 years. The implicit interest rate in the lease is 10 per cent. The fair value of the cargo ship at the commencement of the lease is $2,215,560. The lease is non-cancellable, and requires a lease payment of $300,000 on inception of the lease (on 1 July 2019) and lease payments of $250,000 on 30 June each year (starting 30 June 2020). Included within the $250,000 lease payments is an amount of $25,000 representing payment to the lessor for the insurance and maintenance of the cargo ship. There is no residual payment required. Annuity factor, n=20; r = 10% is 8.5136. b) Provide the entries for the lease in the books of Fisher Ltd as at 1 July 2019, and 30 June 2020.
On 1 July 2019, Fisher Ltd decides to lease a cargo ship from XFinance Ltd. The term of the lease is 20 years. The implicit interest rate in the lease is 10 per cent. The fair value of the cargo ship at the commencement of the lease is $2,215,560. The lease is non-cancellable, and requires a lease payment of $300,000 on inception of the lease (on 1 July 2019) and lease payments of $250,000 on 30 June each year (starting 30 June 2020). Included within the $250,000 lease payments is an amount of $25,000 representing payment to the lessor for the insurance and maintenance of the cargo ship. There is no residual payment required. Annuity factor, n=20; r = 10% is 8.5136.Required:a)Prove that the interest rate implicit in the lease is 10 per cent. b)Provide the entries for the lease in the books of Fisher Ltd as at 1 July 2019, and 30 June 2020. c)Provide the entries for the lease in the books of XFinance Ltd as at 1 July 2019, and 30 June 2020.
During the year ended 30 September 2021 Hanlon Plc entered into two lease transactions.On 1 October 2020 Hanlon made a payment of £90,000 being the first of five equal annual payments under a lease for an item of plant. The lease has an implicit interest rate of 10% and the present value of the total lease payments on 1 October 2020 was £340,000On 1 January 2021, Hanlon made a payment of £18,000 for a one-year lease of an item of equipment.What amount in total would be charged to Hanlon Plc’s statement of profit or loss for the year ended 30 September 2021 in respect of the above transactions. Show your calculations
On 1 July 2019, Fisher Ltd decides to lease a cargo ship from XFinance Ltd. The term of the lease is 20years. The implicit interest rate in the lease is 10 per cent. The fair value of the cargo ship at thecommencement of the lease is $2,215,560. The lease is non-cancellable, and requires a lease paymentof $300,000 on inception of the lease (on 1 July 2019) and lease payments of $250,000 on 30 Juneeach year (starting 30 June 2020). Included within the $250,000 lease payments is an amount of$25,000 representing payment to the lessor for the insurance and maintenance of the cargo ship.There is no residual payment required. Annuity factor, n=20; r = 10% is 8.5136.Required:a) Prove that the interest rate implicit in the lease is 10 per cent. (2 marks)b) Provide the entries for the lease in the books of Fisher Ltd as at 1 July 2019, and 30 June 2020. (4marks)c) Provide the entries for the lease in the books of XFinance Ltd as at 1 July 2019, and 30 June 2020.(4 marks)
On 1 July 2019, Fisher Ltd decides to lease a cargo ship from XFinance Ltd. The term of the lease is 20years. The implicit interest rate in the lease is 10 per cent. The fair value of the cargo ship at thecommencement of the lease is $2,215,560. The lease is non-cancellable, and requires a lease paymentof $300,000 on inception of the lease (on 1 July 2019) and lease payments of $250,000 on 30 Juneeach year (starting 30 June 2020). Included within the $250,000 lease payments is an amount of$25,000 representing payment to the lessor for the insurance and maintenance of the cargo ship.There is no residual payment required. Annuity factor, n=20; r = 10% is 8.5136.Required:Provide the entries for the lease in the books of XFinance Ltd as at 1 July 2019, and 30 June 2020.