On 01-Jan-23 Smith Ltd contracted to lease a machine for 4 years. Annual lease payments (commencing 31-Dec-23) are £40,000. Annual interest rates are 7.5%. a) b) c) d) Required: Show Smith's lease repayment schedule for this contract. Show the accounting entries required to record Smith's lease at the end of the first year. Amend Smith's balance sheet for 31-Dec-23 (shown below) to include this lease transaction. For Y/e 31-Dec-23, calculate Smith's gearing ratios before and after the addition of the lease transaction. Smith Ltd SFP at 31-Dec-23 £'000 £'000 NCA 200 ISC 250 Reserves 120 CA 350 Profit/Loss 50 NCL CL 100 30 Assets 550 Equity & Liabilities 550
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- Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.A finance lease agreement calls for quarterly lease payments of $5,133 over a 15-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the present value of the lease payments and the cost of the asset to the lessor are $182,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a partial amortization table up to the October 1 payment. Note: Enter all amounts as positive values. Round your answers to the nearest whole dollar. Date July 1 July 1 October 1 Lease Payment Effective Interest Decrease in Outstanding balance balance Required A Required B >A finance lease agreement calls for quarterly lease payments of $7,728 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 12%. Both the present value of the lease payments and the cost of the asset to the lessor are $184,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a partial amortization table up to the October 1 payment. Note: Enter all amounts as positive values. Round your answers to the nearest whole dollar. Date Lease Payment Effective Interest Decrease in balance Outstanding balance July 1 July 1 October 1
- On 1 June 20X6 Marino Developments Inc. entered into a 12-month contract to lease a backhoe from Constructors Ltd. for $3,700 monthly with payments made at the beginning of each month. Marino's annual incremental borrowing rate is 6% and Marino is not aware of the rate implicit in the lease. The backhoe will be returned to Constructors Ltd. at the end of the lease. Required: 1. What journal entry is required on 1 June 20X6? 2. Repeat Requirement 1 but assume the contract contains an option to purchase the backhoe at the end of the 12 months, and Marino is expected to exercise this option.On 01/01/2019, Flowers Ltd. entered into a contract with Daisy Ltd. to lease a non-current asset for 3 years. To obtain the lease, Daisy Ltd. incurs in initial direct costs of £7,000 that are paid in credit. Daisy Ltd. must pay £12,000 each year with the lease payments commencing on 31/12/2019. Daisy Ltd. can borrow at a rate of 11% each year. At the end of the lease contract, the ownership of the non-current asset will not be transferred to Daisy Ltd. The useful life of the non-current asset is 10 years. Required: a) After doing the necessary calculations, draw all the journal entries for years 2019, 2020 and 2021 for Daisy Ltd. considering the accounting treatment of the leasing contract from the point of view of Daisy Ltd. b) Describe the accounting treatment for Flowers Ltd (calculations and journal entries are not required for this question). c) How would the accounting treatment change for Daisy Ltd and Flowers Ltd if, at the end of the contract, the ownership of the non-current…On January 1, 2021, Flackmon Company entered into a lease for a truck with a payment of S16,000 per year for 4 years. The expected life of the truck is 5 years, and the first payment will be made immediately. Flackmon could obtain a loan for a similar amount at a rate of 8% per year. Required: A. Record the lease liability and the first payment on January 1, 2021. B. Record the amortization on the leased asset for 2021. C. Record interest for 2021 on the lease. D. Record the lease payment on January 1, 2022. Your answers to this open-ended assignment should be placed in the space below this line. A Date Account Name Debit Credit Jan. 1, 2021 1-Jan-21 B Date Account Name Debit Credit Dec. 31, 2021 C Date Account Name Debit Credit Dec. 31, 2021 D Date Account Name Debit Credit Jan. 1, 2022
- A finance lease agreement calls for quarterly lease payments of $5,376 over a 10-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the present value of the lease payments and the cost of the asset to the lessor are $150,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below Required ARequired B What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Interest expense (Lessee) Interest revenue (Lessor) K Required AOn 1st January 20X2, Bailey plc leased a machine under a four-year lease with four annual lease payments of £25,000 made on 31st Dec of each year. The lease has an implicit annual interest rate of 8%. What amount will appear under current liabilities in respect of this lease in the statement of financial position of Bailey plc as at 31st December 20X2? Select one: a. £25,000 b. £44,582 c. £20,408 d. £21,433 e. £19,846On 1st January 20X2, Bailey plc leased a machine under a four-year lease with four annual lease payments of £25,000 made on 31st Dec of each year. The lease has an implicit annual interest rate of 8%. What amount will appear under current liabilities in respect of this lease in the statement of financial position of Bailey plc as at 31st December 20X2? a. £21,433 b. £20,408 c. £19,846 d. £25,000 e. £44,582
- Core Co. leased a piece of manufacturing equipment from E-So Co. with the following terms: Annual lease payment: $990,000 Term of lease: 5 years Interest rate: 4% Lease commences on January 1, 2023 Payments are made on December 31 of each year in the lease term For parts a and b: a. Prepare journal entries to show the effects for Core Co. for January 1, 2023-December 31, 2024, if the lease is classified as a finance lease. b. Prepare journal entries to show the effects for Core Co. for January 1, 2023-December 31, 2024, if the lease is classified as an operating lease. Operating Lease Finance Lease a. Finance lease: Date Jan. 1, 2023 Account To record the start of the finance lease. Dec. 31, 2023 To record the amortization of leased asset. Dec. 31, 2023 Dec. 31, 2024 Dec. 31, 2024 To record the lease payment. To record the amortization of leased asset. To record the lease payment. > > > > > > > > > > Debit Credit 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Use the information pertaining to Laura Leasing Company and Plote Company from E21.15. Assume that the expected residual value at the end of the lease is $10,000, such that the payments are $24,638.87. Instructions Prepare all of the journal entries for the lessee for 2020 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31. In E21.15 Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Plote Company. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1, 2020, is $80,000. 3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed. 4. The agreement requires equal annual…On July 1, 2020, Shroff Company leased a warehouse building under a 10-year lease agreement. The lease requires quarterly lease payments of $4,500. The first lease payment is due on September 30, 2020. The lease was reported as a finance lease using an 8% annual interest rate. a. Prepare the journal entry to record the commencement of the lease on July 1, 2020. b. Prepare the journal entries that would be necessary on September 30 and December 31, 2020. c. Post the entries from parts a and b in their appropriate T-accounts. d. Prepare a financial statement effects template to show the effects template to show the effects of the entries from parts a and b on the balance sheet and income statement.