Identify the differences between a Finance Lease and an Operating Lease 5.2.
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- MNO Ltd leases an asset as a lessee. The lease agreement is for 6 years. Lease instalments of R145545 made at the beginning of the period and interest 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 oaid. Profit before tax is R600 000. Journalise the transactions for the year wnded 31 december 2021answer in text form please (without image), Note: .Every entry should have narration please MNO Ltd leases an asset as a lessee. The lease agreement is for 6 years . Lease instalments of R145545 made at the beginning of the period and interest is 9% . The commencement of thr lease is 1 April 2021. Asset is depreciatedover 4 years . The tax rate is 28% . Lease payments are allowed as a deduction when oaid. Profit before tax is R600 000. Journalise the transactions for the year wnded 31 december 2021On January 1, 20x1, Entity Y leases out a piece of equipment to Entity X. Information on the lease is as follows: Lease term 3 years Annual rent payable at the end of each year 100,000 Interest rate implicit in the lease 10% The lease provides for the transfer of ownership of the equipment to the lessee at the end of the lease term. What total amount of finance income will Entity Y recognize over the lease term?
- Calculate minimum lease payments for A Ltd. who took an asset on a 5 years lease from B Ltd. using the following information: Payments over the lease term Contingent rent Cost for services given by B Ltd. Taxes to be reimbursed to B Ltd. Residual value guaranteed by A Ltd. Fair value of asset after 5 years 1,000 per month *20,000 40,000 15,000 5,000 6,000 Also, A Ltd. has an option to purchase the asset after a period of 5 years at 2,000. It is reasonably certain that A Ltd. will exercise the option. Required Calculation Minimum Lease Payments.On 01/01/2019, Flowers Ltd. entered into a contract with Daisy Ltd. to lease a non-current asset for 3 years. To obtain the lease, Daisy Ltd. incurs in initial direct costs of £7,000 that are paid in credit. Daisy Ltd. must pay £12,000 each year with the lease payments commencing on 31/12/2019. Daisy Ltd. can borrow at a rate of 11% each year. At the end of the lease contract, the ownership of the non-current asset will not be transferred to Daisy Ltd. The useful life of the non-current asset is 10 years. Required: a) After doing the necessary calculations, draw all the journal entries for years 2019, 2020 and 2021 for Daisy Ltd. considering the accounting treatment of the leasing contract from the point of view of Daisy Ltd. b) Describe the accounting treatment for Flowers Ltd (calculations and journal entries are not required for this question). c) How would the accounting treatment change for Daisy Ltd and Flowers Ltd if, at the end of the contract, the ownership of the non-current…INSTRUCTION: This section consists of TWO (2) structured question. Answer ALL questions. QUESTION 1 On 1 January 2020, Bliss Bhd signed a non-cancellable lease contract to lease a machine for a lease term of three years. Annual lease payment of RM60,000 payable in arrears at the end of each year. At the commencement date of the lease, the interest rate implicit in the lease at 5% per annum. Fees in relation to the preparation of lease contract amounted to RM4,605. Present value of lease payments amounted to RM163,395. The company closes its accounts on 31 December each year. Required: Fill in the following lease liability table with correct figures from 2020 to 2022 (round up the interest expense to the nearest RM). (a) Carrying Carrying Interest Instalment amount b/f (RM) Years amount c/f (RM) (RM) (RM) 2020 2021 2022 (b) Prepare the journal entries to record the initial measurement, interest charge, instalment payment and depreciation of right of use asset in the financial year 2020…
- 11. On 1 July 2020, Sami Ltd leased a machine from Jimmy Ltd. The machine cost Jimmy Ltd OMR1,300,000 to manufacture and had a fair value of OMR1,541,090 on 1 July 2020. The lease agreement contained the following provisions: Lease term |4 years |Annual rental payment, in advance on 1 July each year OMR 415,000| Residual value at end of the lease term Residual guaranteed by lessee Interest rate implicit in lease The lease is cancellable only with the permission of the lessor. OMR 150,000 nil 8% The expected useful life of the machine is 6 years. Sami Ltd intends to return the machine to the lessor at the end of the lease term. Included in the annual rental payment is an amount of OMR15,000 to cover the costs of maintenance and insurance paid for by the lessor. Required A. Prepare the lease payment schedule for the lessee (show all workings); and B. Prepare the lease receipt schedule for the lessor (show all workings)On January 1, 2021, Flackmon Company entered into a lease for a truck with a payment of S16,000 per year for 4 years. The expected life of the truck is 5 years, and the first payment will be made immediately. Flackmon could obtain a loan for a similar amount at a rate of 8% per year. Required: A. Record the lease liability and the first payment on January 1, 2021. B. Record the amortization on the leased asset for 2021. C. Record interest for 2021 on the lease. D. Record the lease payment on January 1, 2022. Your answers to this open-ended assignment should be placed in the space below this line. A Date Account Name Debit Credit Jan. 1, 2021 1-Jan-21 B Date Account Name Debit Credit Dec. 31, 2021 C Date Account Name Debit Credit Dec. 31, 2021 D Date Account Name Debit Credit Jan. 1, 2022On 1 July 2022, Moose Ltd leased a plastic-moulding machine from Wolf Ltd. On 1 July 2022 the machine was in the records of Wolf Ltd at its fair value of $75 000. The lease agreement contained the following provisions. Lease term 4 years Annual rental payment, in advance on 1 July each year $20 750 Residual value at end of the lease term $7 000 Residual guaranteed by lessee $4 000 Interest rate implicit in lease 8% The machine will be depreciated by Moose Ltd on a straight-line basis. The expected useful life of the machine is 5 years. Moose Ltd intends to return the machine to the Wolf Ltd at the end of the lease term. The lease has been classified as a finance lease by Wolf Ltd. Included in the annual rental payment is an amount of $750 to cover the costs of maintenance and insurance paid for by the lessor. Initial direct costs for setting up the lease were incurred by both parties: $1 518 for Moose Ltd and $1 687 for Wolf Ltd. Required: Prepare…
- On 1 July 2020, Cooper Ltd leased a plastic-moulding machine from Jersey City Ltd. The machine cost Jersey City Ltd $260,000 to manufacture and had a fair value of $302,035 on 1 July 2020. The lease agreement contained the following provisions: Lease term 4 years Annual rental payment, in advance on 1 July each year $81,500 Residual value at end of the lease term $30,000 Residual guaranteed by lessee nil Interest rate implicit in lease 8% The lease is cancellable only with the permission of the lessor. The expected useful life of the machine is 6 years. Cooper Ltd intends to return the machine to the lessor at the end of the lease term. Included in the annual rental payment is an amount of $1500 to cover the costs of maintenance and insurance paid for by the lessor. Instructions: a)Explain why the lease should be classified as a finance lease by both lessee and lessor based on the guidance provided in Accounting standard. b) Prepare the lease payment schedule for the lessee (show…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…On January 1, 2021, Company A (lessor) enters into a lease of equipment with Company B. Information on the lease is as follows: Cost of equipment - P320,183 Useful life of equipment - 5 years Lease term - 4 years Annual rental payable at the beginning of each year? Company A incurred initial direct costs of P20,000 in negotiating the lease. The implicit interest rate is 12%. How much is the annual rent?
