On 1 January 2021, YoYo Limited signed a non-cancellable lease agreement to lease a photocopier from...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
On 1 January 2021, YoYo Limited signed a non-cancellable lease agreement to lease a photocopier from Marvel Limited. The following information related to the agreement is: (1) The lease term is 5 years with equal annual rental payments of $8,000 at the beginning of each year, starting from 1 January 2021. (2) The fair value and the cost of the photocopier on 1 January 2021 is $120,000 and $100,000, respectively. (3) The photocopier has an estimated useful life of 10 years. Both YoYo and Marvel adopt straight-line method for depreciation. (4) At the end of the lease term, both parties expect the photocopier to have a residual value of $80,000, none of which is guaranteed. (5) The lease is non-renewable and the asset has to be reverted back to the lessor at the termination of the lease. (6) Collectability of lease payments by lessor is probable. The implicit rate used by Marvel is 8%, which is known by YoYo. (7) Both companies' financial year-end is 31 December. Required: (Answers should be rounded to the nearest dollar.) (a) Explain how Marvel Limited should classify the lease of the photocopier according to five criteria tests supporting with detailed workings or computations where appropriate. (8 marks) (b) Prepare the extracted income statement for Marvel Limited in relation to the lease arrangement for the year ended 31 December 2021. (2 marks) (c) Prepare the journal entries on YoYo Limited's book to reflect the signing of the lease agreement and to record the payment and expenses related to this lease for the year of 2021 (Note: Show the dates of entries clearly). (7 marks) On 1 January 2021, YoYo Limited signed a non-cancellable lease agreement to lease a photocopier from Marvel Limited. The following information related to the agreement is: (1) The lease term is 5 years with equal annual rental payments of $8,000 at the beginning of each year, starting from 1 January 2021. (2) The fair value and the cost of the photocopier on 1 January 2021 is $120,000 and $100,000, respectively. (3) The photocopier has an estimated useful life of 10 years. Both YoYo and Marvel adopt straight-line method for depreciation. (4) At the end of the lease term, both parties expect the photocopier to have a residual value of $80,000, none of which is guaranteed. (5) The lease is non-renewable and the asset has to be reverted back to the lessor at the termination of the lease. (6) Collectability of lease payments by lessor is probable. The implicit rate used by Marvel is 8%, which is known by YoYo. (7) Both companies' financial year-end is 31 December. Required: (Answers should be rounded to the nearest dollar.) (a) Explain how Marvel Limited should classify the lease of the photocopier according to five criteria tests supporting with detailed workings or computations where appropriate. (8 marks) (b) Prepare the extracted income statement for Marvel Limited in relation to the lease arrangement for the year ended 31 December 2021. (2 marks) (c) Prepare the journal entries on YoYo Limited's book to reflect the signing of the lease agreement and to record the payment and expenses related to this lease for the year of 2021 (Note: Show the dates of entries clearly). (7 marks)
Expert Answer:
Related Book For
Introduction to Governmental and Not for Profit Accounting
ISBN: 978-0132776011
7th edition
Authors: Martin Ives, Terry K. Patton, Suesan R. Patton
Posted Date:
Students also viewed these accounting questions
-
The following information related to Caterpillar's inventories is taken from its 2015 annual report. Use this information in answering the questions that follow. There were no LIFO liquidations in...
-
The following information related to ExxonMobils inventories is taken from the companys 2009 annual report. You are to use this information in answering the questions that follow. Inventories. Crude...
-
The following information related to ExxonMobil's inventories is taken from its 2014 annual report. 3. Miscellaneous Financial Information In 2014, 2013, and 2012, net income included gains of $187...
-
Recent trends in recruiting rely on social capital by ______. Multiple choice question. making use of structural holes between groups in a social network where there are few relationships bridging...
-
Why does a limited liability company have to engage a firm of external auditors?
-
"The utility derived from consumption is intangible and unobservable. Therefore, the utility concept has no practical value. Discuss this statement.
-
Locate and print out the latest publishd financial report from www.Cobham.co.uk. Compare the current- and prior-year figures in the balance sheet and profit and loss account, noting the magnitude of...
-
On September 1, 2012, Winans Corporation acquired Aumont Enterprises for a cash payment of $700,000. At the time of purchase, Aumonts balance sheet showed assets of $620,000, liabilities of $200,000,...
-
Smug Ltd produces and sells two versions of fruit juicers: Deluxe and Premium. The juicers produced by Smug Ltd use a patented technology to extract maximum possible juice from most fruits. The...
-
Sam Easton started out as a real estate agent in Atlanta ten years ago. After working two years for a national real estate firm, he transferred to Dallas, Texas, and worked for another realty agency....
-
Barry computer corporation management decides to prepare theflows of the fund??s statement. The company balance sheet isavailable.Assets, thous, USD20012002Cash5331Loans issued870 2 answers
-
The business paid $ 1 0 6 9 2 ( including GST ) for 9 months of business insurance. This was recorded at the time as Prepaid Insurance and GST Paid. How do I enter this into the general journal?
-
Canco Inc., a publicly traded company, has carried on a sports clothing business in a building in Hamilton, Ontario, for many years. Its major business properties are as follows: Land and Building...
-
Joshua Miller was born into a lower middle - class family of five children that didn t have much to share with one another in their home in Oneonta, New York. He landed his first job as a paperboy...
-
You are required to provide a written report with evidence attached that proves you have assessed four recipes (assuming in your mind for any recipes with feedback). Now you need to provide your...
-
Convers Corporation (calendar year-end) acquired the following assets during the current tax year: (ignore 179 expense and bonus depreciation for this problem): (Use MACRS Table 1, Table 2, and Table...
-
The following events pertain to Big Axe Corporation which owns several axe throwing venues: a. Received $92,000 cash from the issuance of common stock. b. Purchased land for $51,000 in cash. c....
-
The Strahler Stream Order System ranks streams based on the number of tributaries that have merged. It is a top-down system where rivers of the first order are the headwaters (aka outermost...
-
The following data come from the report prepared by the actuary for York Citys retirement system as of December 31, 2012: Investments (at actuarial value)....... $ 2,921,000 Actuarial accrued...
-
What information can a city oversight body obtain from a Debt Service Fund?
-
(Multiple Choice) 1. In government- wide financial statements, for which activities is depreciation reported? a. Only for governmental activities b. Only for business- type activities c. For both...
-
The following information for Great Oaks Furniture, a retail furniture and design firm, relates to Exercises 6 through 11. Calculate asset turnover, accounts receivable Mattmm turnover, days sales in...
-
Safeway, Inc. is a large food and drug retailer with more than 1,700 stores in the U.S. and Canada. The following financial information relates to fiscal 2009 and 2008. Required Calculate inventory...
-
Comparative income statements for Cramer Carpets, a carpet retailer, are given below: The president is concerned that net income is down in 2009 even though sales have increased during the year. The...
Study smarter with the SolutionInn App