On 1st January 2019, LMN SAOG entered an agreement to lease an item of plant from a manufacturer for 4 years. The lease requires four annual payments in advance of OMR 200,000 each commencing from 1st January 2019. The plant would have a useful life of four years with no residual value. The present value of the total lease payments is OMR 700,000. The cost of capital used is 10%. Chose the correct journal entry for initial recognition of the lease? O a. Right to use asset (Debit) 500,000; Lease Liability (Credit) 500,000. O b. Lease Liability (Debit) 700,000; Right to use asset (Credit) 700,000. O . Right to use asset (Debit) 700,000; Lease Liability (Credit) 500,000; and bank (Credit) 200,000. O d. Plant (Debit) 700,000; Liability (Credit) 700,000.
On 1st January 2019, LMN SAOG entered an agreement to lease an item of plant from a manufacturer for 4 years. The lease requires four annual payments in advance of OMR 200,000 each commencing from 1st January 2019. The plant would have a useful life of four years with no residual value. The present value of the total lease payments is OMR 700,000. The cost of capital used is 10%. Chose the correct journal entry for initial recognition of the lease? O a. Right to use asset (Debit) 500,000; Lease Liability (Credit) 500,000. O b. Lease Liability (Debit) 700,000; Right to use asset (Credit) 700,000. O . Right to use asset (Debit) 700,000; Lease Liability (Credit) 500,000; and bank (Credit) 200,000. O d. Plant (Debit) 700,000; Liability (Credit) 700,000.
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 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...
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