FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FEN...
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FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FEN Equipment Ltd on 1 January 2015. The lease consists of the following: • Date of inception: • Duration of lease: • Life of leased asset: • Lease payments (annual): 1/1/15 4 years 5 years $550 000 (annual) which includes $80 000 for Maintenance and insurance costs per annum. Guaranteed residual value (Added to final payment): $190 000 • Interest rate: 7% Formula for PV of $1 in n periods =1/(1+k)" Formula for present value of annuity of $1 per period for n periods =1-1/(1+ k)" k where, k is the discount rate expressed in decimal Required: a) Determine the present value of minimum lease rental payment. (5 Marks) b) Prepare the journal entries for FRM Ltd (the Lessee) using the Net Method for the following; (5 Marks) i. Transfer of control ii. Payment of annual payments for 2015 and 2016. FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FEN Equipment Ltd on 1 January 2015. The lease consists of the following: • Date of inception: • Duration of lease: • Life of leased asset: • Lease payments (annual): 1/1/15 4 years 5 years $550 000 (annual) which includes $80 000 for Maintenance and insurance costs per annum. Guaranteed residual value (Added to final payment): $190 000 • Interest rate: 7% Formula for PV of $1 in n periods =1/(1+k)" Formula for present value of annuity of $1 per period for n periods =1-1/(1+ k)" k where, k is the discount rate expressed in decimal Required: a) Determine the present value of minimum lease rental payment. (5 Marks) b) Prepare the journal entries for FRM Ltd (the Lessee) using the Net Method for the following; (5 Marks) i. Transfer of control ii. Payment of annual payments for 2015 and 2016.
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Ansmes to ouestion Breent Value of minimum leas Laleulated Laymentis ad falleme lease layme... View the full answer
Related Book For
Financial Reporting and Analysis Using Financial Accounting Information
ISBN: 978-1439080603
12th Edition
Authors: Charles H Gibson
Posted Date:
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