On 1 April 20X8 Hop entered a two-year lease agreement for a photocopier and on that date made a payment of £1,000. The second payment is due on 1 April 20X9 which is £2,000. This has been classified as a low value asset. The £1,000 has been recorded as Dr Administration expenses, Cr Bank.
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- 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 1 January 2012, an IFl entered into an ljarah Muntahia Bittamleek contract with a customer. The asset was purchased lease term, the asset shal be transferred as a gitt. The terms of the contract are Annual rentals $110,000 Term of lease= 4 years Residual value of asset at end= $3,000 Cost of the asset= $380,000 What shall be the accounting entries in the books of IF for the years 2012 to 2015?On 1 January 2012, Main Contractors Ltd leased a new machine from the Solvitol Finance Company. The following details were obtained from the lease agreement. The capital cost of the machine at 1 January 2012 was £50,000. Six half-yearly payments of £11,000 each are payable in advance, commencing 1 January 2012 in the primary term. Three annual payments of £100 are payable in the secondary term. Main Contractors Ltd has not yet decided if it will take advantage of the secondary term. The estimated useful life of the machine is five years, with a nil residual value. The estimated residual value after three years is £10,000 and, of this, 95% is accountable to Main Contractors Ltd. It is the policy of Main Contractors Ltd to use the straight line method of providing for depreciation. Using (a) the sum of the digits method and (b) the actuarial method, calculate the effect of this rental on the annual accounts of Main Contractors Ltd to 31 December for the relevant…
- Assume that on December 31, 2018, Stora Enso (FIN) signs a 10-year, non-cancelable lease agreement to lease a storage building from Sheffield Storage. The following information pertains to this lease agreement. 1. The agreement requires equal rental payments of €71,830 beginning on December 31, 2018. 2. The fair value of the building on December 31, 2018, is €525,176. 3. The building has an estimated economic life of 12 years, a guaranteed residual value of €10,000, and an expected residual value of €7,000. Stora Enso depreciates similar buildings using the straight-line method. 4. The lease is non-renewable. At the termination of the lease, the building reverts to the lessor.5. Stora Enso's incremental borrowing rate is 8% per year. The lessor's implicit rate is not known by Stora Enso. 1. Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2018, 2019, and 2020.…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.On September 1, 2021, DHI Sound System Company leased office furniture and equipment at a monthly rental of ₱40,000 for 3 years expiring August 31, 2024. As an inducement for DHI to enter into lease, the lessor permitted DHI to use the asset rent-free from September 1 to November 30, 2021. For the year ended December 31, 2021, how much TOTAL expense should DHI record related to the leased asset?
- JK Ltd leased equipment to Co. EF for 8 years, at which time the asset will revert to JK Ltd. The equipment cost JK Ltd $16m and has an expected useful life of 12 years. Its selling price is $22.4m. The present value of the lease payments is $20.4m. The first payment was made at the commencement of the lease. Required: How should JK Ltd classify this list and why?The Arcade Company entered into a 10 year lease under which it made payments of R26 720 annually in advance.Arcade's borrowing rate was 10% per annum. The present value of the land was R125 000 and that of the buildings wasR125 000. The value of the land at the end of 10 years was R167 500 and the value of the buildings was R32 500. The landwould be classified as_______.Select one:a.an accounting leaseb.a finance leasec.a financial leased.an operating leaseSuppose that in addition to the $67,299 annual rental payments, Kimberly-Clark is also required to pay $5,000 for insurance costs each year on the building directly to the lessor, Sheffield Storage. How would this executory cost affect the initial measurement of the lease liability and right-of-use asset?
- WITH SOLUTION/COMPUTATION 61. At the beginning of current year. An entity leased office space for five years at an annual rental of P700,000 under an operating lease. On the same date, the entity incurred the following amounts: Bonus to obtain lease 300,000 First year’s rent 700,000 Last year’s rent 700,000 Security deposit refundable at lease expiration 800,000 Installation of new walls and offices 750,000 Insurance 50,000 Property taxes 40,000 Initial direct cost 100,000 What total amount of the expenses relating to the rent of office space should be reported for the current year?a. 1,100,000b. 1,000,000c. 1,800,000d. 1,340,000On 1 March 2020,the company entered into a lease agreement in order to lease a manufacturing machine with a costprice of R250 000 (VAT inclusive). The period of the lease is five years, and the useful life of the machinery is estimatedat six years. The following is an extract from the lease agreement:4.1.1 Ownership of the machinery will be transferred to the Lessee at the end of the lease.4.1.2 Should the Lessee cancel the lease, the Lessor’s losses will be borne by the Lessee.Monthly instalments are payable in arrears and amount to R5 947 (VAT inclusive). The company used themanufacturing machine for a qualifying purpose. The company is a registered VAT vendor.Required:Provide the deferred tax movement per the balance sheet method for the lease agreement for the financial year ending31 December 2021. Clearly indicate whether the movement represents an income or an expense. Note:- Show all calculations, marks are awarded for calculations.- You may round off to the nearest Rand.On 1 July 20X4 Near Ltd signed a contract to lease a machine from Far Ltd. On the day the lease contract was signed, Far Ltd purchased the machine at fair value. Near Ltd incurred $2,122 to obtain the lease. Far Ltd incurred initial costs of $1,475. The lease agreement included the following provisions. Lease Term Annual payments from Near Ltd to Far Ltd. The initial payment was made on 1 July 20X4 with subsequent payments made on 30 June each year. Amount included in the annual payments to cover the cost of maintenance and repairs that were arranged and paid for by Far Ltd. 6 years $40,000 $3,000 Residual value of the machine at the end of the lease term Amount of the residual value guaranteed by Near Ltd $25,000 $20,000 Amount of the residual value guarantee that is expected to be payable by Near at the end of the lease term $4,000 Interest rate implicit in the lease 4% The expected useful life of the machine with zero residual at the end of the useful life. 8 years At the end of the…