On 1 July 2022 Lang Ltd leased a surveillance vehicle from Pym Ltd. Information in relation...

 

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On 1 July 2022 Lang Ltd leased a surveillance vehicle from Pym Ltd. Information in relation to the lease is as follows: The initial lease is for 4 years and cannot be cancelled. There are 4 annual payments of $66,000 to be paid on 1 July each year in advance. The first payment is to be made on 1 July 2022. The lease payment includes $6,000 of the maintenance and insurance costs. The interest rate implicit in the lease is 6%. The residual value at the end of the lease term is $50,000. The lessee, Lang Ltd, has guaranteed $47,000 of this residual value. The vehicle would be expected to realise $43,000 if sold at the end of the lease (30 June of final year of lease). Pym Ltd incurred direct costs of $680 in relation to the lease. Costs of $501 were incurred by Lang Ltd. At the end of the lease there is an option for Lang Ltd to purchase the vehicle for the guaranteed residual value. Lang Ltd is expected to purchase the vehicle at the end of the lease term (30 June of final year of lease). •The fair value of the vehicle at 1 July 2022 is $218,000. The vehicle has an estimated economic life of 6 years, with a scrap value of $18,110. Lang Ltd applies straight-line depreciation to such vehicles. REQUIRED 1) The accountant for Lang Ltd has calculated that the balance of the lease liability at the beginning of the lease as $262,757. Explain whether the calculation of the accountant is correct. You need to show all calculations to justify your answer. Please round up to the closet amount. [6 marks] 2) Draw up a schedule of lease payments for the duration of the lease. [5 marks] On 1 July 2022 Lang Ltd leased a surveillance vehicle from Pym Ltd. Information in relation to the lease is as follows: The initial lease is for 4 years and cannot be cancelled. There are 4 annual payments of $66,000 to be paid on 1 July each year in advance. The first payment is to be made on 1 July 2022. The lease payment includes $6,000 of the maintenance and insurance costs. The interest rate implicit in the lease is 6%. The residual value at the end of the lease term is $50,000. The lessee, Lang Ltd, has guaranteed $47,000 of this residual value. The vehicle would be expected to realise $43,000 if sold at the end of the lease (30 June of final year of lease). Pym Ltd incurred direct costs of $680 in relation to the lease. Costs of $501 were incurred by Lang Ltd. At the end of the lease there is an option for Lang Ltd to purchase the vehicle for the guaranteed residual value. Lang Ltd is expected to purchase the vehicle at the end of the lease term (30 June of final year of lease). •The fair value of the vehicle at 1 July 2022 is $218,000. The vehicle has an estimated economic life of 6 years, with a scrap value of $18,110. Lang Ltd applies straight-line depreciation to such vehicles. REQUIRED 1) The accountant for Lang Ltd has calculated that the balance of the lease liability at the beginning of the lease as $262,757. Explain whether the calculation of the accountant is correct. You need to show all calculations to justify your answer. Please round up to the closet amount. [6 marks] 2) Draw up a schedule of lease payments for the duration of the lease. [5 marks]

Answer rating: 100% (QA)

To determine whether the accountants calculation of the lease liability balance at the beginning of ... View the full answer