Byte Inc. made a five-year lease of server machine on 1 March 20X5 which has a useful
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Question:
Byte Inc. made a five-year lease of server machine on 1 March 20X5 which has a useful life of 8 years with no residual value. The lease had the following terms: -
- The annual lease payment is $6,000, in which the first payment will be made on 1 March 20X5.
- Byte incurred $2,500 direct administrative costs to finalise the lease contract, in which, the amount is before they receive $800 reimbursement from the lessor.
- The implicit rate of the lease is 4%.
- The present value of the minimum lease payment is $23,000.
Required:
- With full workings and amortisation table, show how the lease of Byte Inc. will be accounted for in the financial statements over the five-year period.
- Will there be any change of depreciation policy if the ownership transfers to Byte Inc. and why? (No workings are needed).
Expert Answer:
Lease payments Made at the Begining of Lease Present Value of Minimam Lease Payment 23000 Add initial Lease payment 6000 Total amount Of Lease liabili... View the full answer
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