Karamo Ltd, a company whose year-end is 31 December, leases a machine from Ian Ltd on...

  

Transcribed Image Text:

Karamo Ltd, a company whose year-end is 31 December, leases a machine from Ian Ltd on 31 July 2020. The term of the lease is 4 years; there is no option to extend the lease term. Under the terms of the lease Karamo is to make annual payments of €42,000. The first payment is payable on the 1 August 2020. The asset has a useful economic life of 5 years and has residual value. Karamo would have purchased the asset it would have cost €146,450. Karamo depreciates machines on a straight-line basis. Required: (a) Complete the calculations and journals (text and numbers) to recognise this lease in the financial statements of Karamo over the full term of the lease. Note: an annuity table is provided at the end. (20 marks) (b) Assuming the details of 3a, but with the following exceptions: 1) The lease has a prımary term of 4 years, with an option to extend the lease term by another 2 years. In the first year of the lease, it is uncertain if Karamo will exercise the option to extend lease term. 2) Karamo Ltd makes a one-off payment of €10,370 at the start of the lease. 3) the first lease payment is payable on the 01 August 2021. Complete the calculations and journals (text and numbers) to recognise the lease in the 2020 financial statements of Karamo (10 marks) (Total: 30 marks) Present Value Factor for an Ordinary Annulty (Interest rater. Number of periodsn) 16% 0.8621 1.6052 22459 17% 0.8547 1.5852 2.2096 2.7432 10% 11% 1 0.9009 1.7125 2.4437 3.1024 15% 0.8696 1.6257 13% 0.8850 1.6681 2.3612 2.9745 3,5172 3.9975 4.4226 4.7968 5.1317 5.4262 5.6869 5.9176 8.1218 6.3025 64624 6.6039 BE I 2% 0.9901 1.9704 12% 0.8929 1.6901 14% 0,8772 1.6467 2.3216 0.91740.9091 0.9346 0.9259 1.8090 0.98040,9709 1.9416 2.9410 2.8839 3.8077 4.7135 5.6014 6.4720 7.3255 8.1622 8.9826 9.7968 11.2551 10.5753 9.9540 11.34B4 0.9615 0.9524 1.8594 2.7232 0.9434 1.7833 1.7591 1.7355 1.9135 2.8288 1.8334 2.6730 3.4651 2 1.8881 2.6243 2.5771 2.5313 2.4869 2.4018 2.2832 27751 3.6299 2.9137 3.4331 3.8887 4,2883 4.6389 4.9464 5.2161 3.3872 3.3121 3.2397 3.1699 3.0373 2.8550 27982 3.7171 4.5797 5.4172 3.9020 3.5460 3.3622 3.7845 4.1604 4.4873 3.2743 3.6847 3.9927 3.1933 3.8897 4.4859 5.0330 3.7900 4.3553 3.6859 3.6048 4.1114 4.1002 4.3295 5.0757 5.7864 6.4632 4.2124 4.9173 5.5824 6.2098 6.8017 7.3601 7.8869 8.3838 8.8627 4.8534 5,7955 6.7282 7.6517 5 4.4518 3.5892 3,9224 5,2421 4.7865 4.8229 4.2305 5.2064 5.9713 5.7466 6.5152 4,7122 5.1461 5.5370 5.8892 4.0386 4.3436 4.6065 4.8332 5.3893 4.8684 4.5638 8.2303 7.0197 6.0021 5.5348 5.3349 4.9676 4.2072 6.7327 7.4353 9.1109 9.7605 6.2469 6.7101 4,4506 4.8586 5.7590 6.1446 6.4951 6.8137 7.1034 7:3667 7.1078 7.7217 5,9952 6.4177 4.7716 5.0188 5,3282 7.7861 8.5302 9.2626 B.5860 10 9.4713 7.0238 5,6502 5.0286 5.1971 6.2065 5.4527 5.2337 4.8364 6.8052 7.1607 7.4869 7.7862 5.8377 6.1944 11 10.3678 8:3064 7.4987 7.5381 7.9039 5.6603 5.8424 6.0021 6.1422 6.2651 5.4206 5.5831 5.7245 5.8474 5.9542 4.9884 6.1183 5.2293 5.3242 5.4053 12 9.3851 8.8833 7.9427 6.4924 5.3423 5.4675 5.5755 5.6685 12.1337 6.4236 6.6282 6.8109 6.9740 9.3936 8.3577 8.7455 a.2442 9.1079 9.4466 13 10.6350 9.9856 6,7499 13.0037 12.1062 11.2961 9.8906 9.2950 9.7122 14 10.5631 6.9819 15 16 17 18 19 20 13.8651 12.8B493 14.7178 13.5777 11.1184 12.5611 11.6523 12.1657 10.3797 10,8378 10.1059 8.0607 8.3126 7.1909 7.3792 7.5488 7.7016 11.9379 8.5595 8,8514 7.6061 7.8237 8.0216 15.5823 14.2919 13.1661 11.2741 10.4773 9.7632 9.1216 16.3993 14.9920 13.7535 12.8583 11.6896 6.7291 6.0472 5.7487 5.4746 6.3729 6.4674 6.5504 4.6231 8.5436 7.1196 7.2497 7.3658 7.4094 5,8178 5.5339 10.8276 10.0591 11.1581 10.3356 114699 10.5940 2 15.415014.0282 110.8356 10.0168 3.2922 8.6487 13.1630 12.0416 11.0612 10.2007 6.1280 6.1982 6.2503 6.3125 6,3587 6.3988 9.3719 8.7556 8.2014 8.9501 9.1285 8.5136 6.8399 6.9380 7.0248 14.3238 13.1339 5.8775 5.8288 5.5845 17.2260 15.6785 18.0456 16.3514 18.8570 17.0112 19.6604 17.6580 15.9369 20.4558 16.4436 14.8568 11.2722 10.3711 21.2434 18.9139 16.9355 15.2470 13.7986 12.5504 10,528 22.0232 19.5235 17.4131 15.6221 14.0939 12.7B34 11.6536 106748 9.8226 9.0770 22.7952 20.1210 17.8768 15.9828 23,5596 20.7069 18.3270 16.3296 14.6430 13.2105 11.9867 10.9352 10.0266 9.2372 24.3164 21.2813 18.7641 16.6631 14.8981 13.4062 12.1371 11.0511 10.1161 25.0658 21.8444 19.1885 16.9837 15 1411 13.5907 12.2777 11.1584 10. 1983 25.6077 223965 19.800417.2920 15.3725 13.7648 12.4090 11.2578 10.2737 9.4269 6542322.9377 20.000417.5885 15.5928 27.2696 23.4683 20.388817.8736 15.8027 14.0840 12.6466 11.4350 10.4062 27.9887 23.9886 20.7658 18.1476 16.0025 28.7027 24.4986 21.1318 18.4112 16.1929 14.3681 12.8540 29.4086 24.9986 21.487218.6546 16.3742 14.4982 129477 30.1075 254888 21.8323 30.7995 25.9695 22.1672 19.1426 16.7113 14.7368 13.1170 31:4847 26.4406 22.4925 19.3679 16.8679 32 1630 26 9028 22.8082 32.8347 27.3555 33 4997 27.7995 23.4124 19.993117:2944 34.1581 28.2348 23.7014 34.8100 24.6616 23.5819 20.3708 15.3062 13.5070 12.0432 10.8380 35 4556 29.0800 24.2543 36:0945 29.4902 12.0863 3.6036 9.8181 8.3649 7.8393 14.8775 13.5903 7.9633 5.8278 5.9731 6.6870 8.7429 21 12.8212| 11.7641 5.6648 7.5620 7.6446 8.0751 7.1018 5.8964 22 23 14.4511 94424 8.7715 8.1757 7.1696 6.0113 5.7234 5,7465 16.2922 13.4886 12.3034 9.5802 B.8832 8.2064 7.7184 7.2297 6,7921 6,0442 6.4338 6,4641 6.4906 6.5135 6.5335 6,5509 6,0726 6.8351 6.8729 11.4693 9.7066 8.9847 8.3481 7.7843 7.2829 5.7662 5.7831 5.7975 25 7.8431 7.8957 7.3300 7.3717 6.0971 14.3752 13.0032 11.8258 108100 8.4217 8.4881 26 9.9290 9.1609 6.9061 6.1182 27 28 6.1364 7.4086 7.4412 7.4701 8.5478 7.9426 6.9352 5.8099 5.8204 5.8294 9.3066 8.6016 7.9844 6.9807 6,1520 29 30 6,1656 6.1772 9.3696 8.6501 8.0218 6,9830 8.6938 B.0552 7.4957 7.0027 6.5660 31 13,9291 11.3498 10.3428 7.5183 7.5383 7.5560 7.5717 7,5858 7.5979 12,5318 7.0199 6.5791 6.1872 5.8371 94790 9.5264 9.5694 9.6006 8.7331 B.O850 8.1116 8,1354 8.1566 32 7.0350 7.0482 7.0599 7.0700 7.0790 6.1959 6,2034 6.2038 6.2153 6.2201 a.7686 6.5905 5.8437 33 34 11.5139 10.4644 10.5178 11.6546 10.5668 18.9083 16.5489 13.0352 11.7172 10.61 18 14.2302 6.6005 6.6091 5.8493 5.8541 12.7538 8.8005 8.8293 11.5869 35 36 37 38 39 40 5.8582 9.6442 9.6765 9.7059 8.8552 8.8786 8.1755 8.1924 6.6166 6.6231 6.6288 14,6210 10,6118 10.6530 5,8617 5.8647 5.8673 5.8695 6,2242 6.2278 6.2300 6,2335 6.2358 6.2377 6.2394 11.7752 8.8996 8,9186 8.2075 7.6087 7.0868 14.8460 13.1935 19.5845 17.0170 14.9491 13.2649 23.1148 19.7928 17.1591 15.0463 13.3317 11.9246 10.7574 11.8289 11.8786 10.6908 9.7327 8.2210 6.6338 7.6183 7.6268 7.6344 7.6410 7.0937 7.0997 10.7255 9.7570 8.2330 8.2438 8.9357 6.6380 9,7791 8.9511 7.1050 6.6418 5.8713 15.1380 13.3941 119872 20.1856 17.4232 15.2245 134524 12.0067 10.8134 41 11:967210.7866 8.2534 7.1097 7.1138 6.8450 5.8729 9.7991 9.8174 8.9649 42 8.9774 8.2819 7.6469 6.6478 43 44 45 5.6743 5.8755 5.8765 17:5459 9.8340 10.8605 9.8491 9.8628 8.9886 8,2696 7.6522 6.6503 20.5488 17.6628 15.3932 13.5579 12.0771 24.5187 20.7200 17.7741 15.4558 13 6055 4 7.1173 7.1205 8.9988 8.2764 7.6568 6.6524 8.2409 12.1084 10.8812 9.0079 8.2825 7.6609 7.1232 5.6543 6.2421 5.8773 Karamo Ltd, a company whose year-end is 31 December, leases a machine from Ian Ltd on 31 July 2020. The term of the lease is 4 years; there is no option to extend the lease term. Under the terms of the lease Karamo is to make annual payments of €42,000. The first payment is payable on the 1 August 2020. The asset has a useful economic life of 5 years and has residual value. Karamo would have purchased the asset it would have cost €146,450. Karamo depreciates machines on a straight-line basis. Required: (a) Complete the calculations and journals (text and numbers) to recognise this lease in the financial statements of Karamo over the full term of the lease. Note: an annuity table is provided at the end. (20 marks) (b) Assuming the details of 3a, but with the following exceptions: 1) The lease has a prımary term of 4 years, with an option to extend the lease term by another 2 years. In the first year of the lease, it is uncertain if Karamo will exercise the option to extend lease term. 2) Karamo Ltd makes a one-off payment of €10,370 at the start of the lease. 3) the first lease payment is payable on the 01 August 2021. Complete the calculations and journals (text and numbers) to recognise the lease in the 2020 financial statements of Karamo (10 marks) (Total: 30 marks) Present Value Factor for an Ordinary Annulty (Interest rater. Number of periodsn) 16% 0.8621 1.6052 22459 17% 0.8547 1.5852 2.2096 2.7432 10% 11% 1 0.9009 1.7125 2.4437 3.1024 15% 0.8696 1.6257 13% 0.8850 1.6681 2.3612 2.9745 3,5172 3.9975 4.4226 4.7968 5.1317 5.4262 5.6869 5.9176 8.1218 6.3025 64624 6.6039 BE I 2% 0.9901 1.9704 12% 0.8929 1.6901 14% 0,8772 1.6467 2.3216 0.91740.9091 0.9346 0.9259 1.8090 0.98040,9709 1.9416 2.9410 2.8839 3.8077 4.7135 5.6014 6.4720 7.3255 8.1622 8.9826 9.7968 11.2551 10.5753 9.9540 11.34B4 0.9615 0.9524 1.8594 2.7232 0.9434 1.7833 1.7591 1.7355 1.9135 2.8288 1.8334 2.6730 3.4651 2 1.8881 2.6243 2.5771 2.5313 2.4869 2.4018 2.2832 27751 3.6299 2.9137 3.4331 3.8887 4,2883 4.6389 4.9464 5.2161 3.3872 3.3121 3.2397 3.1699 3.0373 2.8550 27982 3.7171 4.5797 5.4172 3.9020 3.5460 3.3622 3.7845 4.1604 4.4873 3.2743 3.6847 3.9927 3.1933 3.8897 4.4859 5.0330 3.7900 4.3553 3.6859 3.6048 4.1114 4.1002 4.3295 5.0757 5.7864 6.4632 4.2124 4.9173 5.5824 6.2098 6.8017 7.3601 7.8869 8.3838 8.8627 4.8534 5,7955 6.7282 7.6517 5 4.4518 3.5892 3,9224 5,2421 4.7865 4.8229 4.2305 5.2064 5.9713 5.7466 6.5152 4,7122 5.1461 5.5370 5.8892 4.0386 4.3436 4.6065 4.8332 5.3893 4.8684 4.5638 8.2303 7.0197 6.0021 5.5348 5.3349 4.9676 4.2072 6.7327 7.4353 9.1109 9.7605 6.2469 6.7101 4,4506 4.8586 5.7590 6.1446 6.4951 6.8137 7.1034 7:3667 7.1078 7.7217 5,9952 6.4177 4.7716 5.0188 5,3282 7.7861 8.5302 9.2626 B.5860 10 9.4713 7.0238 5,6502 5.0286 5.1971 6.2065 5.4527 5.2337 4.8364 6.8052 7.1607 7.4869 7.7862 5.8377 6.1944 11 10.3678 8:3064 7.4987 7.5381 7.9039 5.6603 5.8424 6.0021 6.1422 6.2651 5.4206 5.5831 5.7245 5.8474 5.9542 4.9884 6.1183 5.2293 5.3242 5.4053 12 9.3851 8.8833 7.9427 6.4924 5.3423 5.4675 5.5755 5.6685 12.1337 6.4236 6.6282 6.8109 6.9740 9.3936 8.3577 8.7455 a.2442 9.1079 9.4466 13 10.6350 9.9856 6,7499 13.0037 12.1062 11.2961 9.8906 9.2950 9.7122 14 10.5631 6.9819 15 16 17 18 19 20 13.8651 12.8B493 14.7178 13.5777 11.1184 12.5611 11.6523 12.1657 10.3797 10,8378 10.1059 8.0607 8.3126 7.1909 7.3792 7.5488 7.7016 11.9379 8.5595 8,8514 7.6061 7.8237 8.0216 15.5823 14.2919 13.1661 11.2741 10.4773 9.7632 9.1216 16.3993 14.9920 13.7535 12.8583 11.6896 6.7291 6.0472 5.7487 5.4746 6.3729 6.4674 6.5504 4.6231 8.5436 7.1196 7.2497 7.3658 7.4094 5,8178 5.5339 10.8276 10.0591 11.1581 10.3356 114699 10.5940 2 15.415014.0282 110.8356 10.0168 3.2922 8.6487 13.1630 12.0416 11.0612 10.2007 6.1280 6.1982 6.2503 6.3125 6,3587 6.3988 9.3719 8.7556 8.2014 8.9501 9.1285 8.5136 6.8399 6.9380 7.0248 14.3238 13.1339 5.8775 5.8288 5.5845 17.2260 15.6785 18.0456 16.3514 18.8570 17.0112 19.6604 17.6580 15.9369 20.4558 16.4436 14.8568 11.2722 10.3711 21.2434 18.9139 16.9355 15.2470 13.7986 12.5504 10,528 22.0232 19.5235 17.4131 15.6221 14.0939 12.7B34 11.6536 106748 9.8226 9.0770 22.7952 20.1210 17.8768 15.9828 23,5596 20.7069 18.3270 16.3296 14.6430 13.2105 11.9867 10.9352 10.0266 9.2372 24.3164 21.2813 18.7641 16.6631 14.8981 13.4062 12.1371 11.0511 10.1161 25.0658 21.8444 19.1885 16.9837 15 1411 13.5907 12.2777 11.1584 10. 1983 25.6077 223965 19.800417.2920 15.3725 13.7648 12.4090 11.2578 10.2737 9.4269 6542322.9377 20.000417.5885 15.5928 27.2696 23.4683 20.388817.8736 15.8027 14.0840 12.6466 11.4350 10.4062 27.9887 23.9886 20.7658 18.1476 16.0025 28.7027 24.4986 21.1318 18.4112 16.1929 14.3681 12.8540 29.4086 24.9986 21.487218.6546 16.3742 14.4982 129477 30.1075 254888 21.8323 30.7995 25.9695 22.1672 19.1426 16.7113 14.7368 13.1170 31:4847 26.4406 22.4925 19.3679 16.8679 32 1630 26 9028 22.8082 32.8347 27.3555 33 4997 27.7995 23.4124 19.993117:2944 34.1581 28.2348 23.7014 34.8100 24.6616 23.5819 20.3708 15.3062 13.5070 12.0432 10.8380 35 4556 29.0800 24.2543 36:0945 29.4902 12.0863 3.6036 9.8181 8.3649 7.8393 14.8775 13.5903 7.9633 5.8278 5.9731 6.6870 8.7429 21 12.8212| 11.7641 5.6648 7.5620 7.6446 8.0751 7.1018 5.8964 22 23 14.4511 94424 8.7715 8.1757 7.1696 6.0113 5.7234 5,7465 16.2922 13.4886 12.3034 9.5802 B.8832 8.2064 7.7184 7.2297 6,7921 6,0442 6.4338 6,4641 6.4906 6.5135 6.5335 6,5509 6,0726 6.8351 6.8729 11.4693 9.7066 8.9847 8.3481 7.7843 7.2829 5.7662 5.7831 5.7975 25 7.8431 7.8957 7.3300 7.3717 6.0971 14.3752 13.0032 11.8258 108100 8.4217 8.4881 26 9.9290 9.1609 6.9061 6.1182 27 28 6.1364 7.4086 7.4412 7.4701 8.5478 7.9426 6.9352 5.8099 5.8204 5.8294 9.3066 8.6016 7.9844 6.9807 6,1520 29 30 6,1656 6.1772 9.3696 8.6501 8.0218 6,9830 8.6938 B.0552 7.4957 7.0027 6.5660 31 13,9291 11.3498 10.3428 7.5183 7.5383 7.5560 7.5717 7,5858 7.5979 12,5318 7.0199 6.5791 6.1872 5.8371 94790 9.5264 9.5694 9.6006 8.7331 B.O850 8.1116 8,1354 8.1566 32 7.0350 7.0482 7.0599 7.0700 7.0790 6.1959 6,2034 6.2038 6.2153 6.2201 a.7686 6.5905 5.8437 33 34 11.5139 10.4644 10.5178 11.6546 10.5668 18.9083 16.5489 13.0352 11.7172 10.61 18 14.2302 6.6005 6.6091 5.8493 5.8541 12.7538 8.8005 8.8293 11.5869 35 36 37 38 39 40 5.8582 9.6442 9.6765 9.7059 8.8552 8.8786 8.1755 8.1924 6.6166 6.6231 6.6288 14,6210 10,6118 10.6530 5,8617 5.8647 5.8673 5.8695 6,2242 6.2278 6.2300 6,2335 6.2358 6.2377 6.2394 11.7752 8.8996 8,9186 8.2075 7.6087 7.0868 14.8460 13.1935 19.5845 17.0170 14.9491 13.2649 23.1148 19.7928 17.1591 15.0463 13.3317 11.9246 10.7574 11.8289 11.8786 10.6908 9.7327 8.2210 6.6338 7.6183 7.6268 7.6344 7.6410 7.0937 7.0997 10.7255 9.7570 8.2330 8.2438 8.9357 6.6380 9,7791 8.9511 7.1050 6.6418 5.8713 15.1380 13.3941 119872 20.1856 17.4232 15.2245 134524 12.0067 10.8134 41 11:967210.7866 8.2534 7.1097 7.1138 6.8450 5.8729 9.7991 9.8174 8.9649 42 8.9774 8.2819 7.6469 6.6478 43 44 45 5.6743 5.8755 5.8765 17:5459 9.8340 10.8605 9.8491 9.8628 8.9886 8,2696 7.6522 6.6503 20.5488 17.6628 15.3932 13.5579 12.0771 24.5187 20.7200 17.7741 15.4558 13 6055 4 7.1173 7.1205 8.9988 8.2764 7.6568 6.6524 8.2409 12.1084 10.8812 9.0079 8.2825 7.6609 7.1232 5.6543 6.2421 5.8773