On 1 January 2010, Rodeo Ltd. enters a contract to acquire a truck from Merry Ltd. The
Question:
On 1 January 2010, Rodeo Ltd. enters a contract to acquire a truck from Merry Ltd. The car has a useful economic life of 9 years. The lease term is 6 years starting on the inception date. At the date of inception, both the fair value of the car and present value of the lease payment is $54,000, with an implicit interest rate of 8%. The annual lease payment is 7,200 and is paid in advanced, the first payment is due on 1 January 2020. After the last lease payment, the legal title of the truck is transferred to Rodeo Ltd. Present the calculations, accounting entries, statement of profit of loss, and statement of financial position for Rodeo Ltd. for the year.
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach