Zumba Ltd entered into an agreement to lease specialised equipment for a five-year period, commencing January...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Zumba Ltd entered into an agreement to lease specialised equipment for a five-year period, commencing January 1, 2021. At that date, the equipment had a remaining useful life of only four years. Annual lease payments total $6.4 million, 12% of which relates to insurance costs. The entity incurred expenses to the tune of $672,000 to draft the lease, while it received lease incentives amounting to $212,000. The agreement speaks to a guaranteed residual value of $2,800,000. The interest rate implied in the lease is 9%, while the incremental borrowing rate is 4% higher. REQUIRED: • Prepare the relevant journal entries in the last year of the lease. • Prepare the statement of financial position extract in the first year of the lease. Zumba Ltd entered into an agreement to lease specialised equipment for a five-year period, commencing January 1, 2021. At that date, the equipment had a remaining useful life of only four years. Annual lease payments total $6.4 million, 12% of which relates to insurance costs. The entity incurred expenses to the tune of $672,000 to draft the lease, while it received lease incentives amounting to $212,000. The agreement speaks to a guaranteed residual value of $2,800,000. The interest rate implied in the lease is 9%, while the incremental borrowing rate is 4% higher. REQUIRED: • Prepare the relevant journal entries in the last year of the lease. • Prepare the statement of financial position extract in the first year of the lease.
Expert Answer:
Answer rating: 100% (QA)
aDecember 31 2019 Prepaid insurance 576000 Accumulated amortization of lease incentive 212000 Liabil... View the full answer
Related Book For
Financial Accounting A User Perspective
ISBN: 978-0470676608
6th Canadian Edition
Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry
Posted Date:
Students also viewed these accounting questions
-
A Shangdong exporter entered into an agreement to sell two metric tons of Chinese peanuts with a Singapore company. Both the L/C and Sales Contract specified that the peanuts were of grade 3. When...
-
Turnbull Ltd has entered into an agreement to lease a machine to Abbott Ltd. Details are: Length of lease 5 years Commencement date 1 July 2013 Annual lease payment, payable 30 June each year...
-
Palmer SA entered into an agreement to lease 12 computers from Wendt Electronics. The present value of the lease payments is 186,300. Assuming that this is a finance lease, what entry would Palmer...
-
Question: If you were a consultant and for the below M&A case, what questions would you ask as a consultant of the acquiring company of the mine and in order to complete the valuation: A firm is...
-
Layton Davis oversees projects for Pace Construction Company. Recently, the companys controller sent him a performance report regarding the construction of the Highlands Bank, a project that Davis...
-
This table indicates the freezing and boiling points of several molecules: Molecule Freezing Point (C) Boiling Point (C) Water 0 100 Carbon tetrachloride (CCl4) - 23 77 Methane (CH4) - 182 - 164...
-
What the paralegals role is in the litigation process?
-
From the partial work sheet below, prepare a balance sheet for Adams' ShoeShine. Adams' Shoe Shine Work Sheet (Partial) For Month Ended June 30, 20 -- BALANCE SHEET KIMESTATEMENT ACCOUNT TITLE DERIT...
-
What was the overall turnout for the runoff of the race between Paul Vallas and Brandon Johnson in the Mayor's race runoff for Chicago? was it high or low when comparing with the last election?...
-
An earthwork contractor is considering to purchase a new excavator which will cost $130,000 including tax and transportation expenses. Answer the following questions about depreciation. Note: GDS...
-
Unauthorized changes in accounting methods made by a taxpayer must be accepted by the IRS. True Fales
-
What is a call option, and how does it work in the context of financial markets? 2. What factors determine the price of a call option? 3. How does the strike price of a call option affect its value?...
-
Complete the following steps to determine if 213 is prime. (a) Complete the following statement. If x is composite, then x has a factor that: (b) Use the Sieve of Eratosthenes to find all potential...
-
The horizontal bar AB moves up with the velocity of v1 = 2m/s; CD moves with the velocity of V2 = 2m/s as shown in the figure. Determine the velocity of the ring M. M
-
Find the winner of this election under the plurality method. Winner =
-
Provide examples of international customs in the field of environmental protection. Describe the types of international environmental treaties. What is the framework approach for the elaboration and...
-
Let's consider the case of a call option on MSFT with strike $210, expiration 234 days from today. MSFT is being traded at $247 today. This time, let's consider that you purchased this call option at...
-
Perform the operation by first converting the numerator and denominator to scientific notation. Write the answer in scientific notation. 7,200,00/0.000009
-
As a potential lender considering making a long-term loan to a company, discuss how much comfort you might get from knowing what long-term assets the company has, specifically in the form of (1)...
-
Discuss the purpose and importance of a partnership agreement.
-
The following trial balance before adjustments is for Snowcrest Ltd on December 31, 2011: Data for adjusting entries: 1. As of December 31, 2011, 80% of the commissions that had been paid in advance...
-
What are the responsibilities of the governments toward the stateless? Do the United States and other powerful nations have responsibilities toward groups such as the Rohingya? Following the...
-
The United States and Canada are two of only 33 countries that have jus soli, the right to citizenship of any individual born on their soil. Why do you think this right is so limited, and do you...
-
What are stratified societies and what kinds of social systems are they identified with?
Study smarter with the SolutionInn App