The following is an extract from the lease agreement: 4.1.1 Ownership of the machinery will be transferred to the Lessee at the end of the lease. 4.1.2 Should the Lessee cancel the lease, the Lessor’s losses will be borne by the Lessee. Monthly instalments are payable in arrears and amount to R5 947 (VAT inclusive). The company used the manufacturing machine for a qualifying purpose. The company is a registered VAT vendor. Required: Provide the deferred tax movement per the balance sheet method for the lease agreement for the financial year ending 31 December 2021. Clearly indicate whether the
On 1 March 2020,the company entered into a lease agreement in order to lease a manufacturing machine with a cost
price of R250 000 (VAT inclusive). The period of the lease is five years, and the useful life of the machinery is estimated
at six years.
The following is an extract from the lease agreement:
4.1.1 Ownership of the machinery will be transferred to the Lessee at the end of the lease.
4.1.2 Should the Lessee cancel the lease, the Lessor’s losses will be borne by the Lessee.
Monthly instalments are payable in arrears and amount to R5 947 (VAT inclusive). The company used the
manufacturing machine for a qualifying purpose. The company is a registered VAT vendor.
Required:
Provide the
31 December 2021. Clearly indicate whether the movement represents an income or an expense.
Note:
- Show all calculations, marks are awarded for calculations.
- You may round off to the nearest Rand.
Step by step
Solved in 3 steps
