The interest rate implicit in the lease is 6.85%. The present value of the lease payments on 1 July 2020 was correctly calculated at $25,000. There is no pargain purchase option at the end of the lease cerm. Annual lease payments of $9,500 are paid in arrears each 1 July. The first payment was made or 1 July 2021. The useful life of the safe is 10 years.
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- On 1 July 2020, Table Ltd leased equipment from Chair Ltd. The following are details of the equipment and the lease contract: On 1 July 2020 equipment has a fair value of $110,000 (at fair value in Chair Ltd’s accounts) Lease term is 5 years, useful life of the equipment is 6 years, and Table Ltd will return the equipment at the end of the lease term Lease payments are in advance and will be paid on 1 July of each year, starting 1 July 2020, with $24,000 as the annual payment Residual value of the equipment at the end of the lease term is $8,000, with Table Ltd guaranteeing 75% of the residual value The interest rate implicit in the lease arrangement is 6%. In setting up the lease arrangement Table Ltd incurred costs of $2,354, while Chair Ltd incurred costs of $3,141. Required: a) Prepare the necessary journal entries for Table Ltd on 1 July 2020. b) Calculate interest and depreciation expense incurred on 30 June…On 1 July 2020 Holmes Ltd leased a surveillance van (vehicle) from Watson Ltd. Information in relation to the lease is as follows: The initial lease is for 3 years and cannot be cancelled. However, the lease can be renewed for a further 1 year (for the same annual payment amount). Holmes Ltd is not expected to renew the lease at the end of the 3 years. There are 3 annual payments of $66,000 to be paid on 30 June each year in arrears. The first payment is to be made on 30 June 2021. The interest rate implicit in the lease is 6%. The residual value at the end of the lease term is $50,000. The lessee, Holmes Ltd, has guaranteed $47,000 of this residual value. The van is expected to realise $45,000 at the end of the lease (30 June of final year of lease). Watson Ltd incurred direct costs of $400 in relation to the lease. Costs of $280 were incurred by Holmes Ltd. At the end of the lease there is an option for Holmes Ltd to purchase the van for the guaranteed residual value. However…On January 1, Year 1, Autonomous Systems Ltd. (ASL) signed a contract to lease computer equipment from Lenovo for three years. The lease agreement requires ASL to pay $30,000 at the end of each year of the lease. The company's borrowing rate is 6%. Under U.S. GAAP, the lease would be classified as operating. However, ASL is based in Singapore and will account for the lease using IFRS. How much higher (or lower) are ASL's expenses related to this lease in Year 1 as accounted for under IFRS compared to how much expense would be recorded related to this lease in Year 1 under U.S. GAAP? Use a negative sign to denote that IFRS expenses are a lower amount, if needed.
- During the year ended 30 September 2021 Hanlon Plc entered into two lease transactions.On 1 October 2020 Hanlon made a payment of £90,000 being the first of five equal annual payments under a lease for an item of plant. The lease has an implicit interest rate of 10% and the present value of the total lease payments on 1 October 2020 was £340,000On 1 January 2021, Hanlon made a payment of £18,000 for a one-year lease of an item of equipment.What amount in total would be charged to Hanlon Plc’s statement of profit or loss for the year ended 30 September 2021 in respect of the above transactions. Show your calculationsOn 1 July 2019, Fisher Ltd decides to lease a cargo ship from XFinance Ltd. The term of the lease is 20 years. The implicit interest rate in the lease is 10 per cent. The fair value of the cargo ship at the commencement of the lease is $2,215,560. The lease is non-cancellable, and requires a lease payment of $300,000 on inception of the lease (on 1 July 2019) and lease payments of $250,000 on 30 June each year (starting 30 June 2020). Included within the $250,000 lease payments is an amount of $25,000 representing payment to the lessor for the insurance and maintenance of the cargo ship. There is no residual payment required. Annuity factor, n=20; r = 10% is 8.5136. b) Provide the entries for the lease in the books of Fisher Ltd as at 1 July 2019, and 30 June 2020.On 1 July 2019, Fisher Ltd decides to lease a cargo ship from XFinance Ltd. The term of the lease is 20 years. The implicit interest rate in the lease is 10 per cent. The fair value of the cargo ship at the commencement of the lease is $2,215,560. The lease is non-cancellable, and requires a lease payment of $300,000 on inception of the lease (on 1 July 2019) and lease payments of $250,000 on 30 June each year (starting 30 June 2020). Included within the $250,000 lease payments is an amount of $25,000 representing payment to the lessor for the insurance and maintenance of the cargo ship. There is no residual payment required. Annuity factor, n=20; r = 10% is 8.5136.Required:a)Prove that the interest rate implicit in the lease is 10 per cent. b)Provide the entries for the lease in the books of Fisher Ltd as at 1 July 2019, and 30 June 2020. c)Provide the entries for the lease in the books of XFinance Ltd as at 1 July 2019, and 30 June 2020.
- On 1 July 2020, Pininfarina, an Italian automotive design service, acquired equipment under a four-year finance lease agreement from ABB Robotics. The equipment had a present value of $1,077,450. The equipment had an estimated useful life of six years. The implicit rate of interest on the equipment was 8% per annum. The lease involved four payments, three annual payments on 30 June each year of $304,000 and an additional final payment at the end of the lease of $400,000 on 30 June 2024. Pininfarina will return the equipment at the end of the lease to ABB Robotics. Required: a) Complete a lease schedule for the four years up to and including 30 June 2024On 1 January 2022, Enola plc entered a six-year lease contract with Maverick plc for a brand-new electric delivery vehicle. The contract requires a payment of £8,000 every year in advance. The interest rate implicit in the lease is 7% and Enola plc uses actuarial method to allocate interest for finance leases. The economic life of the vehicle is estimated to be 90 months and the residual value of the vehicle at the end of six years will be £1,000. The newly appointed accountant did not take any account related to this leasing (including the payment made at the beginning of the year). Requirement: The Financial Director of Enola plc would like a report on how the six-year lease should be accounted for. Prepare a note containing the full calculation and explanation of your proposed treatment with reference to International Financial Reporting Standards.On 1 January 2022, Enola plc entered a six-year lease contract with Maverick plc for a brand-new electric delivery vehicle. The contract requires a payment of £8,000 every year in advance. The interest rate implicit in the lease is 7% and Enola plc uses actuarial method to allocate interest for finance leases. The economic life of the vehicle is estimated to be 90 months and the residual value of the vehicle at the end of six years will be £1,000. The newly appointed accountant did not take any account related to this leasing (including the payment made at the beginning of the year). Requirements: The Financial Director of Enola plc would like a report on how the six-year lease should be accounted for. Prepare a note containing the full calculation and explanation of your proposed treatment with reference to International Financial Reporting Standards.
- Bergify Corp. has entered into a lease arrangement with Foodie Ltd. in which it has agreed to lease an item of machinery from Foodie Ltd. on the following terms: Date of commencement of lease - July 1, 2022 Duration of lease - 8 years Implicit rate of interest - 6% Initial up-front payment - P200,000 Lease payments at the end of each year - P100,000 The lease is considered non-cancellable. The economic life of the machinery is 10 years. However, Bergify Corp. will return the machinery to Foodie Ltd. at the end of the lease term. At this stage it is expected that the machinery will have a residual unguaranteed value of P80,000 at the end of the lease term. The company uses straight line method. (Round off the PV factor to four decimal places)How much is the carrying value of the right of use assets on July 1, 2022?On January 1, year 1, Cenron Systems Ltd. (CSL) assigned a contract to lease computer equipment from Dell for three years. The lease agreement requires CSL to pay $45,000 at the end of each year of the lease. The company´s borrowing rate is 6.5%. Under U.S. GAAP, the lease would be classified as operating. However, CSL is based in Singapore and will account for the lease using IFRS 16. a) Compute the value of the lease liability that CSL will record under IFRS 16 on January 1, Year 1: b) In each year of the lease, CSL will record depreciation expense on the leasehold asset and interest expense on the lease obligation. Compute the amount of the two expenses in the lease´s first year: c) CSL is partially backed by U.S. venture capital fund that would like to know how the lease would be accounted for under U.S. GAAP. How much expense would CSL recognize for the lease if it were a U.S. company during the first year?: please explain!Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $35,004 at the beginning of each year. The first payment is received on January 1, 2020. Crosley had purchased the machine during 2019 for $160,000. Collectibility of lease payments by Crosley is probable. Crosley set the annual rental to ensure a 6% rate of return. The machine has an economic life of 10 years with no residual value and reverts to Crosley at the termination of the lease. Instructions a. Compute the amount of the lease receivable. b. Prepare all necessary journal entries for Crosley for 2020. c. Suppose the collectibility of the lease payments was not probable for Crosley. Prepare all necessary journal entries for the company in 2020. d. Suppose at the end of the lease term, Crosley receives the asset and determines that it actually has a fair value of $1,000 instead of the anticipated…