FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FEN Equipment Ltd on 1 January 2015. The lease consists of the following: Date of inception: Duration of lease: 1/1/15 4 years 5 years $550 000 (annual) which includes $80 000 for Maintenance and insurance costs per annum. • Life of leased asset: • Lease payments (annual): Guaranteed residual value (Added to final payment): • Interest rate: $190 000 7% Formula for PV of $1 in n periods =1/(1+k)^ 1-1/(1+k)* Formula for present value of annuity of $1 per period for n periods = - k where, k is the discount rate expressed in decimal
FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FEN Equipment Ltd on 1 January 2015. The lease consists of the following: Date of inception: Duration of lease: 1/1/15 4 years 5 years $550 000 (annual) which includes $80 000 for Maintenance and insurance costs per annum. • Life of leased asset: • Lease payments (annual): Guaranteed residual value (Added to final payment): • Interest rate: $190 000 7% Formula for PV of $1 in n periods =1/(1+k)^ 1-1/(1+k)* Formula for present value of annuity of $1 per period for n periods = - k where, k is the discount rate expressed in decimal
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Subject: Advance finance accounting
Required:
a) Determine the present value of minimum lease rental payment.
b) Prepare the
i. Transfer of control
ii. Payment of annual payments for 2015 and 2016.
Transcribed Image Text:FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FEN
Equipment Ltd on 1 January 2015. The lease consists of the following:
Date of inception:
Duration of lease:
1/1/15
4 years
5 years
$550 000 (annual) which includes $80 000 for
Maintenance and insurance costs per annum.
• Life of leased asset:
• Lease payments (annual):
Guaranteed residual value
(Added to final payment):
• Interest rate:
$190 000
7%
Formula for PV of $1 in n periods =1/(1+k)^
1-1/(1+k)*
Formula for present value of annuity of $1 per period for n periods = -
k
where, k is the discount rate expressed in decimal
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