Answered: Prepare a lease schedule for ABE Ltd…

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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BAE Ltd

On 1 July 2017, ABE Ltd entered into an agreement to lease a vehicle from Cat Ltd. The present value of the vehicle on this date was $92,910. The lease agreement contained the following information.

Lease term: five years
Economic life of vehicle: six years
An initial deposit of $10,000
Five annual lease payments of $23,000 on 30 June each year in arrears.
Interest rate implicit in the lease: 12%
The vehicle will be returned to Cat Ltd at the end of the lease period.

Required:

Prepare a lease schedule for ABE Ltd for the lease period.
Prepare general journal entries to record the lease in the books of the lessee for the year ending June 2018.
Provide an extract of the income statement and

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