On 1 October 2014, Fresh Company acquired an item of plant under a five-year lease agreement. At that date, the present value of the total lease payments was $25m. The agreement had an implicit finance cost of 10% per annum and required an immediate deposit of $2m and annual rentals of $6m paid on 30 September each year for five years. What is the current liability of the lease in Fresh Company's statement of financial position as at 30 September 2015?

On 1 October 2014, Fresh Company acquired an item of plant under a five-year lease agreement. At that date, the present value of the total lease payments was $25m. The agreement had an implicit finance cost of 10% per annum and required an immediate deposit of $2m and annual rentals of $6m paid on 30 September each year for five years. What is the current liability of the lease in Fresh Company's statement of financial position as at 30 September 2015?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Darwin Limited entered into a lease agreement on 1 July 2020 for its demolition machinery. The duration of the lease is four years. The cost price of the machinery was R1 800 000. Installments of R432 649 are payable annually in arrears on 30 June. The implicit interest rate is 15% per annum. Ownership will be transferred to Darwin Limited at the end of the lease term. Darwin Limited depreciates machinery over 10 years using the straight-line method, with nil residual value. The wear and tear allowance on machinery is at a rate of 25% per annum using the straight-line method. REQUIRED: Show ONLY the following three-line items in the Statement of Financial Position as at 30 June 2021: Right of use asset Current portion of lease liability Lease liability
On 1 March 2020,the company entered into a lease agreement in order to lease a manufacturing machine with a costprice of R250 000 (VAT inclusive). The period of the lease is five years, and the useful life of the machinery is estimatedat six years. The following is an extract from the lease agreement:4.1.1 Ownership of the machinery will be transferred to the Lessee at the end of the lease.4.1.2 Should the Lessee cancel the lease, the Lessor’s losses will be borne by the Lessee.Monthly instalments are payable in arrears and amount to R5 947 (VAT inclusive). The company used themanufacturing machine for a qualifying purpose. The company is a registered VAT vendor.Required:Provide the deferred tax movement per the balance sheet method for the lease agreement for the financial year ending31 December 2021. Clearly indicate whether the movement represents an income or an expense. Note:- Show all calculations, marks are awarded for calculations.- You may round off to the nearest Rand.
On 1 July 2020, Andrew Ltd enters into a 5-year agreement to lease an item of machinery from Josh Ltd. Andrew Ltd incurred costs of $4 500 in setting up the lease agreement. The machinery has a fair value of $450 000 at the inception of the lease and it is expected to have an economic life of 6 years, after which time it will have a residual value of $35 000. The lease agreement details are as follows: Length of lease 5years Commencement date 1 July 2020 Annual lease payment, payable 30 June each year commencing 30 June 2021 $95,000 Residual value at the end of the lease term $80,000 Residual value guarantee by Andrew Ltd $50,000 Interest rate implicit in the lease 10% The lease is cancellable without any penalties All insurance and maintenance costs are paid by Josh Ltd and are expected to amount to $15 000 per year and will be reimbursed by Andrew Ltd by being included in the annual lease payment of $95 000. The machinery will be…
FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FENEquipment Ltd on 1 January 2015. The lease consists of the following: Date of inception: 1/1/15 Duration of lease: 4 years Life of leased asset: 5 years Lease payments (annual): $550 000 (annual) which includes $80 000 forMaintenance and insurance costs per annum. Guaranteed residual value(Added to final payment): $190 000 Interest rate: 7%Formula for PV of $1 in n periods =1/(1+k)nFormula for present value of annuity of $1 per period for n periods =(1-1/(1+k)n)/kwhere, k is the discount rate expressed in decimal a) Determine the present value of minimum lease rental payment. b) Prepare the journal entries for FRM Ltd (the Lessee) using the Net Method for the following;i. Transfer of controlii. Payment of annual payments for 2015 and 2016.
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: 1/1/15 Duration of lease: 4 years Life of leased asset: 5 years Lease payments (annual): $550 000 (annual) which includes $80 000 for Maintenance and insurance costs per annum. Guaranteed residual value (Added to final payment): $190 000 Interest rate: 7% Formula for PV of $1 in n periods =1/(1+k)n Formula for present value of annuity of $1 per period for n periods = 1-1/(1+ k)n/k where, k is the discount rate expressed in decimal Prepare the journal entries for FRM Ltd (the Lessee) using the Net Method for the following; A. Transfer of control B. Payment of annual payments for 2015 and
The following information pertains to a leased contract entered into by Blue Company, lessee, on January 1, 2018: Lease term, 5 years, useful life of the leased asset, 20 years; Annual rental payable at year-end, P800,000 and the implicit rate is10%. The lease contract contains an option for Blue Company to extend for another 5 years but at the commencement of the lease, the exercise of the option is not reasonably certain, however on January 1, 2021, Blue Company decided to extend the lease term by another 5 years. However, the annual rental starting 2023 (6th year) will be P1,000,000 and the new implicit rate is 8%. How much is the depreciation expense in 2021?
ABC Ltd has entered into an agreement to lease an item of equipment that produces teddy bears. The terms of the lease are as follows: Date of entering lease: 1 July 2023. Duration of lease: 10 years. Life of leased asset: 10 years. There is no residual value. Lease payments: $5000 at lease inception, $5500 on 30 June each year (that is, 10 payments). Included within the lease payments are executory costs of $500. Fair value of the machine at lease inception: $27 470. find out the interest rate implicit in the lease with the above details.
FRM Ltd acquired an item of equipment and enters into a non-cancellable lease agreement with FENEquipment Ltd on 1 January 2015. The lease consists of the following: Date of inception: 1/1/15 Duration of lease: 4 years Life of leased asset: 5 years Lease payments (annual): $550 000 (annual) which includes $80 000 forMaintenance and insurance costs per annum. Guaranteed residual value(Added to final payment): $190 000 Interest rate: 7%Formula for PV of $1 in n periods =1/(1+k)nFormula for present value of annuity of $1 per period for n periods =kk n 11/(1 )where, k is the discount rate expressed in decimalRequired:a) Determine the present value of minimum lease rental payment. b) Prepare the journal entries for FRM Ltd (the Lessee) using the Net Method for the following;i. Transfer of controlii. Payment of annual payments for 2015 and 2016.
ABC Ltd has entered into an agreement to lease an item of equipment that produces teddy bears. The terms of the lease are as follows: Date of entering lease: 1 July 2023. Duration of lease: 10 years. Life of leased asset: 10 years. There is no residual value. Lease payments: $5000 at lease inception, $5500 on 30 June each year (that is, 10 payments). Included within the lease payments are executory costs of $500. Fair value of the machine at lease inception: $27 470.
Baltimore Ltd entered into a contract to acquire a vehicle from BryanstonMotors. The lease term as well as the economic life of the vehicle is fiveyears. The cash price of the vehicle is R180 000. The lease liability is payablein annual instalments of R45 082 from 1 May 2019. The interest rate implicit in the lease is 8%. Baltimore Ltd paid attorney fees of R800 in respect of the lease agreement. It is the accounting policy of Baltimore Ltd to depreciate vehicles over five years on a straight‐ line basis.Required:Q.1.2.1 In terms of IFRS16 – Leases briefly discuss why the above contractis a lease.Q.1.2.2 Complete the amortisation schedule for the lease of the vehicle.Round all amounts to the nearest rand.Q.1.2.3 Calculate the depreciation for the reporting period ending31 March 2020 in the books of the lessee. All answers must comply with the requirements of International FinancialReporting Standards (IFRS), in particular IFRS16 – Leases.All calculations must be shown as marks will be…
Pebworth Co entered into a contract to acquire the right to use an item of plant for a period of three years from 1 April 2022. The contract meets the definition of a lease under IFRS 16 Leases. The present value of the future lease payments on commencement of the lease was $15,462,000 which is also the initial carrying amount of the right-of-use asset. Pebworth Co will also make three rental payments of $6 million per annum which are due to be paid in arrears on 31 March each year. The useful life of the plant is deemed to be five years. There is no option to buy the asset at the end of the lease term. The interest rate implicit in the lease is 8% per annum. What is the total charge to profit or loss in respect of this lease at 31 March 2023?
On 1 January 2020, the company had entered into a five-year lease agreement for an office space with GP S.A.O.G. The company must make lease payments of OMR 50,000 annually at the beginning of each year. The present value of the total lease payments is OMR 208,500. The cost of capital used is 10%. What amount should be recognised in right-to-use-asset as per IFRS 16 in the books of the lessee. O a. OMR 158,500. O b. OMR 208,500. OC. OMR 250,000. O d. OMR 25,000.