Question: On 1 July 2020, Amy Ltd leased a processing plant to Kent Ltd. The plant was purchased by Amy Ltd on 1 July 2020 for
On 1 July 2020, Amy Ltd leased a processing plant to Kent Ltd. The plant was purchased by Amy Ltd on 1 July 2020 for its fair value of $512,122. The lease agreement contained the following provisions:
Lease term- 3 Years
The economic life of the plant- 5 Years
Annual rental payment, In arrears (Commencing 30/06/2021)- $200,000
Residual value at the end of the lease term - $100,000
Residual value guaranteed by the lessee -$60,000
The interest rate implicit in the lease - 10%
Annuity factor @ 10% , after the 3 years - 2.4869
Discounting factor of $1, after 3 years- 0.7513
Thejournal entry torecordthe annualdepreciationof plant by Kent Ltd would be:
Answer 1
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Dr Plant accumulated depreciation $180,820 Cr Plant depreciation expenses $180,820
Dr Plant depreciation expenses $137,374 Cr Plant accumulated depreciation $137,374
Dr Plant depreciation expenses $160,820 Cr Plant accumulated depreciation $160,820
Dr Plant depreciation expenses $180,820 Cr Plant accumulated depreciation $180,820
(Dr) Lease receivable (Cr) Asset
Dr Asset Cr Lease receivable
The appropriate journal entry for the initial recognitionby alessorof a finance lease arrangement:
(Please ignore the amount)
Answer 2
Choose...
Dr Plant accumulated depreciation $180,820 Cr Plant depreciation expenses $180,820
Dr Plant depreciation expenses $137,374 Cr Plant accumulated depreciation $137,374
Dr Plant depreciation expenses $160,820 Cr Plant accumulated depreciation $160,820
Dr Plant depreciation expenses $180,820 Cr Plant accumulated depreciation $180,820
(Dr) Lease receivable (Cr) Asset
Dr Asset Cr Lease receivable
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