II. Question two (30 marks) Ready Finance Plc agreed to lease a machine to X Plc...

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II. Question two (30 marks) Ready Finance Plc agreed to lease a machine to X Plc commencing on 1 January Year 1. The lease was a 6 year finance lease of a machine on 1 January Year 1 with annual lease payments of $18,000, payable in arrears. The fair value of the machine at the commencement of the lease was $80,000 and Ready Finance Ple incurred initial direct costs of $2,000 when arranging the lease. The estimated residual value of the asset at the end of the lease is $10,000. The lessee has guaranteed an amount of $8,000. The interest rate implicit in the lease is 10.798%. This lease is a finance lease. (P/A, 10.798%, 6) = 4.2553; (P/F, 10.798 %, 6)-0.54052 Required 1. Calculate lessor's lease payments (5 marks). 2. Calculate lessor's finance income (5 marks). 3. Calculate (1) year 1's lease interest (finance income) (5 marks) and (2) Closing net investment of year 1 (5 marks). 4. Make journal entries for lessor (1) on 1 January Year 1 (5 marks) and (2) finance income for year 1 (5 marks). II. Question two (30 marks) Ready Finance Plc agreed to lease a machine to X Plc commencing on 1 January Year 1. The lease was a 6 year finance lease of a machine on 1 January Year 1 with annual lease payments of $18,000, payable in arrears. The fair value of the machine at the commencement of the lease was $80,000 and Ready Finance Ple incurred initial direct costs of $2,000 when arranging the lease. The estimated residual value of the asset at the end of the lease is $10,000. The lessee has guaranteed an amount of $8,000. The interest rate implicit in the lease is 10.798%. This lease is a finance lease. (P/A, 10.798%, 6) = 4.2553; (P/F, 10.798 %, 6)-0.54052 Required 1. Calculate lessor's lease payments (5 marks). 2. Calculate lessor's finance income (5 marks). 3. Calculate (1) year 1's lease interest (finance income) (5 marks) and (2) Closing net investment of year 1 (5 marks). 4. Make journal entries for lessor (1) on 1 January Year 1 (5 marks) and (2) finance income for year 1 (5 marks).

Answer rating: 100% (QA)

1Lessors lease payments Annual lease payments Initial direct costs 18000 2000 20000 Lessors lease payments refer to the payments made by the lessor Ready Finance Ple in a finance lease agreement In th... View the full answer