6BL. Enterprise Limited is a finance company which deals in lease financing. On January 1, 2016 the company entered intoa leasing agreement with Charles Construction Limited to lease a specialized equipment for a period of 8 years, Under thelease agreement, GBL. Enterprise Limited was responsible for the maintenance, insurance and repairs. The cost of theequipment was $\$ 3.8 \mathrm{~m) $ and the annual rental was $\$ 700,000 $ payable at the end of each. Theestimate economic life of the equipment was 10 years after which it is expected to have a scrap value of $\$ 150,000 $.The implicit rate of interest is $ 12 \%$ per annum and the fair value of the equipment was $\$ 4.5 \mathrm{m} $.Required:a. Prepare the Journal entries for Charles Construction Limited for 31 December 2016?b. Prepare the Extracts for the Income Statement and the Statement of Financial Position as at December 312017.c. Prepare the Extract for the Income Statement for GBL Enterprise Limited for three years endi 31 December 2018 ?d. Show the disclosure requirements as per IFRS 16?

The objective of the question is to prepare the journal entries for Charles Construction Limited for…

Answered: 6BL. Enterprise Limited is a finance…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2024, Lesco Leasing leased equipment to Quality Services under a finance/sales - type lease designed to earn Lesco a 12% rate of return for providing long-term financing. The lease agreement specified: 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) Ten annual payments of $56, 000 beginning January 1, 2024, the beginning of the lease and each December 31 thereafter through 2032. The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to Lesco was $322,741. The lease qualifies as a finance lease/sales - type lease. A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $5,000 per year are specified, beginning January 1, 2024. Lesco was to pay this cost as incurred, but lease payments reflect this expenditure. Also included in the $56,000 payments is an insurance premium of…
J4. Account
As a supplier of heavy-duty machineries, Pine Ltd leased a machine to Bulla Ltd on an 8-year non-cancellable lease. The following information is available: Lease term 8 years i) Residual value at the end of the term $10 000 Ii) Bargain purchase option at the end of the term $20 000 iii) Minimum lease payments (at the end of each year) $120 000 iv) Service costs included in minimum lease payments $20 000 Rate implicit in the contract 12% Cumulative present value factor at 12% for 8 years 4.9676 Present value factor at 12% for 8th year 0.4039 Required: Which of the items from i) – iv) above will not be included in determining the leased asset and leased liability at the inception of the lease, and explain why not? ANSWER a): What is the amount to be recorded as an asset and a liability in the books of the lessee that is in accordance with AASB 16 Leases?
On 1 January 2016, company A owned an asset with a net book of RM 100000. The fair value of the asset on this date was RM 120000. On this date, company A sold the asset to Granite Bhd for RM 150000 and immediately leased back the asset for a period of 5 years. The leaseback is an operating lease. Explain how company A shall account for the sale and leaseback transaction and show the journal entries required.
Q46.
On January 1, 2018, This Co., a lessor, sold an equipment that it had been leasing under direct financing lease. On the same date data relating to sale and lease follow: Sale price - P400,000 Gross lease receivable - 180,000 Unearned interest income - 30,000 Implicit rate - 12% How much is the gain (or loss) on the sale of the leased asset on January 1, 2017?
Berkeley Inc. is engaged in manufacturing. For the procurement of machines, Berkeley Inc. uses the leasing method. On May 1, 2016, Berkeley Inc. entered into a lease contract with Mindy Corp. on a printing machine that costs Rp180,000,000 with the following agreement:- The lease period is 3 years, payments are made semi-annually with the first payment is November 1, 2016.- The lease payment per 6 months is Rp35,000,000,-.- Berkeley Inc. has the option to purchase the production machine at a price of Rp1,500,000,- at the end of the lease period- The economic life of the production machine is 5 years- The incremental borrowing rate is 15%- Mindy Corp's implicit interest rate is 12%, known to Berkeley Inc. Prepare the schedule of lease payment! (Use the following format)
10. On 1 July 2008, Copper Coin Ltd leased a photocopier from Silver Note Corp., a company that manufactures, retails and lease copiers. The photocopier has cost Silver Note Corp. $30,000 to make but had a fair value on 1 July 2008 of $35,080. The lease agreement contained the following provisions: Lease term 3 years Annual payment, payable in advance on 1 July each year $ 14,500 Economic life of the copier 4 years Estimated residual value at the end of the lease term when the $3,000 copier is returned to Silver Note Corp. Residual value guaranteed by Copper Coin $ 1,500 Interest rate implicit in the lease 10% The lease is cancellable, provided another lease is immediately entered into. The annual payment included an amount of $2,500 p.a. to reimburse Silver Note Corp. for the cost of paper and toner supplied to Copper Coin Ltd. Silver Note Corp.'s solicitor prepared the lease agreement for a fee of $1,365. On 30 June2011, at the end of the lease term, Copper Coin Ltd retuned the…
Universal Leasing leases electronic equipment to a variety of businesses. The company's primary service is providing alternate financing by acquiring equipment and leasing it to customers under long-term sales-type leases. ⚫ Universal earns interest under these arrangements at a 10% annual rate. • The company leased an electronic typesetting machine it purchased for $36,900 to a local publisher, Desktop Incorporated, on December 31, 2023. The lease contract specified annual payments of $8,353 beginning January 1, 2024, the beginning of the lease, and each December 31 through 2025 (three-year lease term). ⚫ The publisher had the option to purchase the machine on December 30, 2026, the end of the lease term, for $18,700 when it was expected to have a residual value of $22,700, a sufficient difference that exercise seems reasonably certain. 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) Required: 1. Show how…
10. On July 1, 20x6, Entity A leased a delivery truck from Entity B under a 3-year operating lease. Total rent for the term of the lease will be P36,000, payable as follows: 12 months at P 500 = P 6,000 12 months at P 750 = 9,000 12 months at P1,750 = 21,000 All payments were made when due. In Entity B's June 30, 20x8, balance sheet, the accrued rent receivable should be reported as c. 12,000 d. 21,000 b. 9,000 (AICPA)
me.1
On 1 July 2015, Tiger Ltd leased a PET Injection machine from Ibri City Ltd. The machine cost Ibri City Ltd $140,000 to manufacture and had a fair value of $159,109 on 1 July 2015. The lease agreement contained the following provisions: Lease term 4 years Annual rental payment, in advance on 1 July each year $51,500 Residual value at end of the lease term $15,000 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 5 years. Tiger 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 $11500 to cover the costs of maintenance and insurance paid for by the lessor. Required Explain why the lease should be classified as a finance lease by both lessee and lessor based on the guidance provided in Accounting Standard (show all workings including lease…

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