a) Determine the rate of interest implicit in the lease and calculate the present value ofthe lease payments.b) Prepare the journal entries in the books of Tea TreeLtd for the years ending 30 June2021 and 30 June 2022.c) Prepare the portion of the statement of financial position for the year ending 30 June2022 relating to the lease asset and lease liability. Your manager comes to you and states"What's this new lease standard IFRS 16 about, I hear it will make our performancemetrics much worse?" I also hear that the economic and financial markets effects of theCOVID-19 pandemic may impact a company's lease accounting in several ways.Your manager requests that you respond by email and you cover the following points.• A brief critique of the former lease standard IAS-17• The main issues and changes in the new lease standard IFRS16A response to your manager on the comment above i.e. the impacts on financial metrics(ratios) the new standard is likely to createÀn explanation of three key lease accounting impacts due to the economic and financialmarkets effects of the COVID-19 pandemic.Required:In a series of bullet points, respond to the manager on the issues raised. Tea Tree Ltd enters into a non-cancellable five-year lease agreement with Top Machines Ltd on 1July 2020. The lease is for an item of machinery that, at the inception of the lease, has a fair valueof $647,192.The machinery is expected to have an economic life of six years, after which time it will have anexpected residual value of $105,000. There is a bargain purchase option that Tea Tree Ltd will beable to exercise at the end of the fifth year for $140,000.There are to be five annual payments of $175,000, the first being made on 30 June 2021. Indudedwithin the $175,000 lease payments is an amount of $17,500 representing payment to the lessor forthe insurance and maintenance of the equipment. The equipment is to be depreciated on a straight-line basis.

Note: The question present in the second image alone has been answered as the requirements pertain…

Tea Tree Ltd enters into a non-cancellable five-year lease agreement with Top Machines Ltd on 1 July 2020. The lease is for an item of machinery that, at the inception of the lease, has a fair value of $647,192. The machinery is expected to have an economic life of six years, after which time it will have an expected residual value of $105,000. There is a bargain purchase option that Tea Tree Ltd will be able to exercise at the end of the fifth year for $140,000. There are to be five annual payments of $175,000, the first being made on 30 June 2021. Indluded within the $175,000 lease payments is an amount of $17,500 representing payment to the lessor for the insurance and maintenance of the equipment. The equipment is to be depreciated on a straight- line basis.

Tea Tree Ltd enters into a non-cancellable five-year lease agreement with Top Machines Ltd on 1 July 2020. The lease is for an item of machinery that, at the inception of the lease, has a fair value of $647,192. The machinery is expected to have an economic life of six years, after which time it will have an expected residual value of $105,000. There is a bargain purchase option that Tea Tree Ltd will be able to exercise at the end of the fifth year for $140,000. There are to be five annual payments of $175,000, the first being made on 30 June 2021. Indluded within the $175,000 lease payments is an amount of $17,500 representing payment to the lessor for the insurance and maintenance of the equipment. The equipment is to be depreciated on a straight- line basis.

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter19: Lease Financing

Section: Chapter Questions

Problem 8MC: Lewis’s management has been considering moving to a new downtown location, and they are concerned...

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How do you treat repair and maintenance costs in lease versus purchass decision? Fewa's management has been considering moving to a new downtown location and they are concerned that these plans may come to fruition prior to the expiration of the lease. If the move occurs, Fewa would buy or lease an entirely new set of equipment, and hence management would like to include a cancellation clause in the lease contract. What impact would such a clause have on the riskiness of the lease from Fewa's standpoint? From the lessor's standpoint? If you were the lessor, would you insist on changing any of the lease terms if a cancellation clause were added?
Lewis’s management has been considering moving to a new downtown location, and they are concerned that these plans may come to fruition prior to the equipment lease’s expiration. If the move occurs then Lewis would buy or lease an entirely new set of equipment, so management would like to include a cancelation clause in the lease contract. What effect would such a clause have on the riskiness of the lease from Lewis’s standpoint? From the lessor’s standpoint? If you were the lessor, would you insist on changing any of the other lease terms if a cancelation clause were added? Should the cancelation clause contain provisions similar to call premiums or any restrictive covenants and/or penalties of the type contained in bond indentures? Explain your answer.
When preparing the journal entries for an operating lewhich of the following is NOT TRUE? If all of these answers are rue, select "All of the answers above are true". The lessee will reduce the Lease Liability account as lease payments are made. The lessor will recognize depreciation on equipment leased to others. The lessor will reclassify equipment leased to the lessee in an Equipment Leased to others account. The lessee will debit the Right-to-Use Asset account for the present value of the future lease payments. All of the answers above are true.
A lease is an agreement in which the lessor conveys the right to use an asset for an agreed period of time to the lessee in return for a payment or series of payments (IAS 17.4). Because of rapid changes in technologies, most of the production companies involve in the lease contracts rather than of purchasing new machineries. Being the accounting specialization student, how will you support this? Explain any three advantages of this contract with suitable examples.
Find a publicly traded company that has assets under capital lease on its balance sheet. Provide a link to the balance sheet in your post, and explain the details of the leasing transactions based on the amounts and disclosures found in the financial statements. What potential benefits do you think the company expected when choosing to lease, rather than buy, these assets? Do not choose a company that has already been reported on by one of your classmates. Participate in follow-up discussion by critiquing the posts provided by your classmates and defending their challenges to your post. All posts should be grammatically correct and proofread for spelling.
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Operations Management James is taking courses during the first half of Summer Semester at Ohio University, and he needs a car to use while he is in Athens for the summer. Laura is taking classes abroad during the summer, and she agrees to lease her car to James. Laura tells James they can figure out how much the lease will cost at the end of the summer when she returns. Under the UCC, this lease would not valid without a negotiated price and length of the lease. True False Why??
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