Question 4 Kenz Limited employs its staff on a five-day working week. The weekly salaries is $15,000 and employees are paid in arrears on Friday. That is, when the employees are paid, the salaries paid are for work performed in the preceding week. Kenz Limited retains $5,000 per week to pay the Inland Revenue Department for pay-as-you-earn (PAYE) tax on behalf of the employees and $1,000 per week to pay staff medical benefits. Tax and medical benefits are paid on the following Monday and Tuesday of each week respectively. The end of the reporting period falls on a Wednesday. Required Prepare the accounting entries necessary to record the salary on balance day and its payments.
Question 4
Kenz Limited employs its staff on a five-day working week. The weekly salaries is $15,000 and employees are paid in arrears on Friday. That is, when the employees are paid, the salaries paid are for work performed in the preceding week. Kenz Limited retains $5,000 per week to pay the Inland Revenue Department for pay-as-you-earn (PAYE) tax on behalf of the employees and $1,000 per week to pay staff medical benefits. Tax and medical benefits are paid on the following Monday and Tuesday of each week respectively. The end of the reporting period falls on a Wednesday.
Required Prepare the accounting entries necessary to record the salary on balance day and its payments.
Question 5
Telephone Limited signed a contract with Machinery Leasing Company at 1st January 2020 to lease a machine. The agreement consists in 10 equal annual payments of $300,000 at the beginning of each year with an interest rate of 15%. The yearly rental payment includes $30,000 of executory costs related to insurance on the machine. The executory costs of $30,000 are paid to the lessor each year. There is an option to purchase the machine at the end of the lease term for $50,000. The machine has an estimated useful life of 14 years and a guaranteed residual value of $20,000. Both companies adopt
Required (Round all numbers to the nearest dollar)
- a) Discuss the nature of this lease to Telephone Limited.
- b) Discuss the nature of this lease to Machinery Leasing Company.
- c) Calculate the present value of the minimum lease payment.
- d) Prepare the
journal entries for Telephone Limited in 2020. - e) Prepare the journal entries for Machinery Leasing Company in 2020.
Answer all the required questions including all the sub parts. Show workings.
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