88 On 1 January 20X4, Jedi Plc entered into a finance lease for a machine with a fair value of GHS 2,050. Lease payments of GHS 500 are payable annually in advance for five years, starting on 1 January 20X4. Jedi Plc allocates finance charges on a sum-of-digits basis. According to IAS 17 Leases, what is Jedi Ple's non-current liability in respect of this finance lease as at 31 December 20X4? A B с D GHS 1,200 GHS 1,230 GHS 1,365 GHS 1,500
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- Notes to the accounts: On 31stMarch 2021 Langwith entered into a four-year lease contract for a new machine used in the production with a contract requiring the payment of £14,930 per annum in arrears. This does not appear in the accounts above. The interest rate implicit in the lease is 7.5% and Langwith uses the actuarial method to allocate interest for finance leases. The Langwith’s depreciation policy for these assets applies the straight-line method over four years and there is not thought to be a residual value of the asset at the end of this period. AlcuinLtd acquired two million of the ordinary shares of Langwith Ltd on 29th November 2014 when the retained earnings of Langwith Ltd were £1,000,000. AlcuinLtd acquired 75% of the ordinary shares of Halifax Ltd on 7th September 2016 when the retained earnings of Halifax Ltd were £500,000; Alcuin use the proportionate share (‘partial’) method of valuing the non-controlling interest in Halifax. During the year goods with an…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…On 1st January 20X2, Bailey plc leased a machine under a four-year lease with four annual lease payments of £25,000 made on 31st Dec of each year. The lease has an implicit annual interest rate of 8%. What amount will appear under current liabilities in respect of this lease in the statement of financial position of Bailey plc as at 31st December 20X2? a. £21,433 b. £20,408 c. £19,846 d. £25,000 e. £44,582
- On 1 January 2022 Hull Ltd entered into a 10-month lease for a retail unit. Lease rent were £12,000 per month payable in advance. As an incentive however, Hull Ltd was given the first month as a rent-free period. Required Calculate the rent expense which should be recognised in Hull Ltd' statement of profit or loss for the year ended 31 March 2022. Assume that Hull Ltd elects to use the short-term lease exemption under IFRS 16.On 1 January 20X1, T Bhd entered into a lease agreement to lease a machinery from Q Bhd (of which RM4,000 deposits was immediately paid) for a four year period. The machinery had a fair value of RM16,680 (straight-line depreciation should be used) at 1 January 20X1 and the lease agreement requires four further annual payments of RM4,000 each starting on 31 December 20X1. The interest rate implicit in the lease is to be taken as 10% per annum. The expected useful life of the machinery is five years, at the end of which the residual value is estimated to be nil. At the end of the lease period the title to the asset is transferred to the lessee. Required: Prepare extracts of the statement of profit or lossof T Bhd (lessee) for the years ended 31 December 20X1, 20X2, 20X3 and 20X4 and the statement of financial position as at that date in accordance with IFRS 16.On 1 January 20x2, TwitX Ltd (TXL) entered into a three-year non-cancellable lease agreement to lease a piece of equipment from TipTop Leasing Ltd (TTL). Lease rental of $12,000 per year are to be paid by TXL on 31 December of each of the three years, commencing 31 December 20x2. TXL guaranteed that the leased asset would have a residual value of $3,000 when the leased asset is reverted to the lessor at the end of the lease term on 31 December 20x4. TXL had no knowledge of the implicit rate used in the lease and its incremental borrowing rate was 10% per annum. TLL's rate of return is 8% per annum. The equipment was new on 1 January 20x2, had a fair market value of $35,000. The leased asset was expected to have an estimated useful life of four years and a residual value of $4,000. Required: (part 1) Compute, as required under FRS 116 Leases, the lease liability and right-of-use asset from the perspective of TXL as at 1 January 20x2. Present the amortization table showing the…
- On 1st January 20X2, Bailey plc leased a machine under a four-year lease with four annual lease payments of £25,000 made on 31st Dec of each year. The lease has an implicit annual interest rate of 10%. What amount will appear under current liabilities in respect of this lease in the statement of financial position of Bailey plc as at 31st December 20X2? Select one: O a. £20,661 Ob. £18,783 Oc. £20,408 O d. £25,000 Oe. £43,38813. Euro Co. leased vehicles from Winters Co. on January 1, 2021, which is classified as an operating lease. The present value of the lease payments discounted at 11% was $91,500. Ten annual lease payments of $14,000 are due at each January 1 beginning January 1, 2021. The amortization of the right-of-use asset for the reporting year ending December 31, 2021, would be:19 On September 30, 2024, Truckee Garbage leased equipment from a supplier and agreed to pay $125,000 annually for 15 years beginning September 30, 2025. Generally accepted accounting principles require that a liability be recorded for this lease agreement for the present value of scheduled payments. Accordingly, at inception of the lease, Truckee recorded a $1,214,031 lease liability. Determine the interest rate implicit in the lease agreement. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
- On January 1, 20x1, Entity X (Customer) enters into a 4-year lease of equipment with Entity Y (supplier). The annual rent is P220,000 payable at the END of each year. The equipment has a remaining useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee’s incremental borrowing rate is 12%. Entity X uses the straight-line method of depreciation. The relevant present value factors are as follows: PV of an ordinary annuity of P1 @ 10%, n=4 3.16987 PV of an ordinary annuity of P1 @ 12%, n=4 3.03735 Requirements: 1.How much is the lease liability to be recognized by Entity X on initial recognition? 2.How much is the annual depreciation on the right-of-use asset? 3.Assume the lease is a finance lease. How much is the net investment in the lease to be recognized by Entity Y on initial recognition? 4.Assume the lease is an operating lease. How much is the lease (rent) income in 20x1? 5.Assume the lease qualifies for accounting as…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 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…