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FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FEN Equipment Ltd on 1 January 2015. The lease consists of the following:   Date of inception: 1/1/15 Duration of lease: 4 years Life of leased asset: 5 years Lease payments (annual): $550 000 (annual) which includes $80 000 for Maintenance and insurance costs per annum.   Guaranteed residual value (Added to final payment):                      $190 000 Interest rate: 7%     Formula for PV of $1 in n periods =1/(1+k)n Formula for present value of annuity of $1 per period for n periods = 1-1/(1+ k)n/k where, k is the discount rate expressed in decimal Prepare the journal entries for FRM Ltd (the Lessee) using the Net Method for the following; A. Transfer of control B. Payment of annual payments for 2015 and

FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FEN Equipment Ltd on 1 January 2015. The lease consists of the following:   Date of inception: 1/1/15 Duration of lease: 4 years Life of leased asset: 5 years Lease payments (annual): $550 000 (annual) which includes $80 000 for Maintenance and insurance costs per annum.   Guaranteed residual value (Added to final payment):                      $190 000 Interest rate: 7%     Formula for PV of $1 in n periods =1/(1+k)n Formula for present value of annuity of $1 per period for n periods = 1-1/(1+ k)n/k where, k is the discount rate expressed in decimal Prepare the journal entries for FRM Ltd (the Lessee) using the Net Method for the following; A. Transfer of control B. Payment of annual payments for 2015 and

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 14E: Lessee and Lessor Accounting Issues The following information is available for a noncancelable lease...
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FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FEN Equipment Ltd on 1 January 2015. The lease consists of the following:

 

  • Date of inception: 1/1/15
  • Duration of lease: 4 years
  • Life of leased asset: 5 years
  • Lease payments (annual): $550 000 (annual) which includes $80 000 for

Maintenance and insurance costs per annum.

 

  • Guaranteed residual value

(Added to final payment):                      $190 000

  • Interest rate: 7%

 

 

Formula for PV of $1 in n periods =1/(1+k)n

Formula for present value of annuity of $1 per period for n periods =

1-1/(1+ k)n/k

where, k is the discount rate expressed in decimal

  • Prepare the journal entries for FRM Ltd (the Lessee) using the Net Method for the following;
    • A. Transfer of control
    • B. Payment of annual payments for 2015 and

 

 

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