On July 1, 2023, Sherlock Ltd leased a processing facility from Holmes Ltd. Sherlock Ltd purchased the
Question:
On July 1, 2023, Sherlock Ltd leased a processing facility from Holmes Ltd. Sherlock Ltd purchased the facility on July 1, 2023 for its fair value of $348,942. The lease contained the following provisions:
Lease Term | 3 years |
Economic life of the plant | 5 years |
Annual rent payment, late (as of 6/30/24) | $120 000 |
Residual value at the end of the lease term | $50 000 |
Residual guaranteed by the lessee | $30 000 |
Interest rate implicit in the lease | 8% |
The lease is terminated only with the permission of the landlord. |
Holmes Ltd intends to return the processing plant to Sherlock Ltd at the end of the lease term. The lease has been classified as a finance lease by Sherlock Ltd.
Required
- Prepare:
- the lease payment schedule for Holmes Ltd (show all jobs)
- the journal entries in the records of Holmes Ltd for the year ending 30 June 2025.
- Prepare:
- the lease receipt schedule for Sherlock Ltd (show all jobs)
- the journal entries in the records of Sherlock Ltd for the year ending 30 June 2025.
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas