Small Ltd signed a 3-year contract with Big Ltd for the use of a factory on 1 July 2020 with the option to purchase the machinery at the end of the lease term. It is reasonably expected that Small Ltd will not exercise the bargain purchase option but returns the asset to the lessor. The leased machinery meets the criteria of a leased asset in accordance with AASB16 Leases. The following information shows the lease terms: Lease term (non-cancellable) Expected useful life of the machinery Expected residual value of the machinery Residual value guaranteed Expected fair value of the machinery at the end of lease term Bargain purchase price at the end of lease term Net initial directly attributable costs (paid at 1 July 2020) Initial lease payment (paid at 1 July 2020) Annual lease payment (paid in arrears at 30 June) Interest rate implicit in the lease O $36,857 O $98,284 O $36,857 3 years O $84,049 8 years nil $40 000 $50 000 $60 000 $10 000 What is the amount the depreciation expense that Small Ltd should recognize for the year ended 30 June 2021 (rounded to the nearest dollar) in accordance with the requirements of AASB 16 Leases? $50 000 $80 000 12% p.a.
Small Ltd signed a 3-year contract with Big Ltd for the use of a factory on 1 July 2020 with the option to purchase the machinery at the end of the lease term. It is reasonably expected that Small Ltd will not exercise the bargain purchase option but returns the asset to the lessor. The leased machinery meets the criteria of a leased asset in accordance with AASB16 Leases. The following information shows the lease terms: Lease term (non-cancellable) Expected useful life of the machinery Expected residual value of the machinery Residual value guaranteed Expected fair value of the machinery at the end of lease term Bargain purchase price at the end of lease term Net initial directly attributable costs (paid at 1 July 2020) Initial lease payment (paid at 1 July 2020) Annual lease payment (paid in arrears at 30 June) Interest rate implicit in the lease O $36,857 O $98,284 O $36,857 3 years O $84,049 8 years nil $40 000 $50 000 $60 000 $10 000 What is the amount the depreciation expense that Small Ltd should recognize for the year ended 30 June 2021 (rounded to the nearest dollar) in accordance with the requirements of AASB 16 Leases? $50 000 $80 000 12% p.a.
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 2E: Lessee Accounting with Payments Made at Beginning of Year Adden Company signs a lease agreement...
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