Question

QUESTION TWO (18 MINUTES) A machine was leased by Irie Ltd on 1 January 2016 via a four year lease. The machine's fair value at the inception of the lease was $130,000. Irie Ltd. is responsible for its upkeep and lease payments of $40,000 are payable on 31 December each year. The interest rate implicit in the lease is 10% and the present value of minimum lease payment is $126,760. Required: [A] Explain the type of lease Irie Ltd has. (2 marks) [B] Show in the books of Irie Ltd: (i) the journal entries at the inception of the lease, i.e. January 1, 2016; (2 marks) (ii) the journal entries at 31 December 2016; (5 marks) (iii) state the current liability and the non-current liability as at December 31, 2016. (1 mark) [Total 10 marks] 

          QUESTION TWO
(18 MINUTES)
A machine was leased by Irie Ltd on 1 January 2016 via a four year lease. The machine's fair
value at the inception of the lease was $130,000. Irie Ltd. is responsible for its upkeep and lease
payments of $40,000 are payable on 31 December each year. The interest rate implicit in the
lease is 10% and the present value of minimum lease payment is $126,760.
Required:
[A] Explain the type of lease Irie Ltd has.
(2 marks)
[B] Show in the books of Irie Ltd:
(i) the journal entries at the inception of the lease, i.e. January 1, 2016;
(2 marks)
(ii) the journal entries at 31 December 2016;
(5 marks)
(iii) state the current liability and the non-current liability as at December 31, 2016.
(1 mark)
[Total 10 marks]
Show more…
QUESTION TWO (18 MINUTES) A machine was leased by Irie Ltd on 1 January 2016 via a four year lease. The machine's fair value at the inception of the lease was 130,000. Irie Ltd. is responsible for its upkeep and lease payments of40,000 are payable on 31 December each year. The interest rate implicit in the lease is 10% and the present value of minimum lease payment is $126,760. Required: [A] Explain the type of lease Irie Ltd has. (2 marks) [B] Show in the books of Irie Ltd: (i) the journal entries at the inception of the lease, i.e. January 1, 2016; (2 marks) (ii) the journal entries at 31 December 2016; (5 marks) (iii) state the current liability and the non-current liability as at December 31, 2016. (1 mark) [Total 10 marks]

Added by Catherine B.

Close

Horngren’s Cost Accounting
Horngren’s Cost Accounting
Srikant M. Datar, Madhav V. Rajan 16th Edition
AceChat toggle button
Close icon
Ace pointing down

Please give Ace some feedback

Your feedback will help us improve your experience

Thumb up icon Thumb down icon
Thanks for your feedback!
Profile picture
OUESTIONTWO 18MINUTESI Requircd: [A] Explain the type of lease Irie Ltd has. (2 marks) [B] Show in the books of Irie Ltd: (2 marks) (5 marks) (ii) the journal entries at 31 December 2016; (1 mark) [Total10 marks]
Close icon
Play audio
Feedback
Powered by NumerAI
Kathleen Carty Jennifer Stoner
Ivan Kochetkov verified

Supreeta N and 63 other subject Principles of Accounting educators are ready to help you.

Ask a new question
*

Labs

-

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs
*

Recommended Videos

-
maxi-ltd-has-acquired-a-vehicle-under-a-four-year-lease-commencing-january-1-2019-the-vehicles-remaining-expected-useful-life-is-four-years-four-payments-are-due-to-the-lessor-in-the-amount-76622

Maxi Ltd has acquired a vehicle under a four-year lease commencing January 1, 2019. The vehicle's remaining expected useful life is four years. Four payments are due to the lessor in the amount of $50,000 per year beginning December 31, 2019. The lessee's incremental borrowing rate is 20%. Required: a. Prepare the relevant journal entries in the first year of the lease. b. Prepare the relevant financial statement extracts in the first year of the lease.

Supreeta N.
on-dec-31st-2020-juict-ltd-which-has-a-dec-31st-year-end-received-and-paid-and-phone-bill-of-14000-comprisingcalls-for-the-three-months-ended-on-dec-31st-2020-8000line-rental-x-6-months-endi-79637

On December 31st, 2020, Juict Ltd (which has a December 31st year-end) received and paid a phone bill of $14,000, comprising: - Calls for the three months ended on December 31st, 2020: $8,000 - Line rental for 6 months ending March 31st, 2021: $6,000 What amounts should appear in the 2020 income statement and on the closing 2020 balance sheet in respect of this bill? Record these transactions in a transaction worksheet.

Supreeta N.
marquardt-company-signs-a-5-year-lease-related-to-office-space-at-an-annual-rental-of-30000-at-the-end-of-the-second-year-the-company-decides-to-close-its-operation-in-this-part-of-country-i-60857

Marquardt Company signs a 5-year lease related to office space at an annual rental of ÂŁ30,000. At the end of the second year, the company decides to close its operation in this part of the country. Its lease is non-cancelable, and the penalty for non-payment is ÂŁ62,000. The present value of future payments on the lease is estimated to be ÂŁ81,000. The company does not believe that it can sublet these facilities. Explain how this transaction should be accounted for at December 31, 2015. Prepare the journal entry to record this transaction on December 31, 2015.

Manasvee S.
*

Recommended Textbooks

-
Horngren’s Cost Accounting

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition
achievement 1,669 solutions
Cost Accounting A Managerial Emphasis

Cost Accounting A Managerial Emphasis

Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan 14th Edition
achievement 1,992 solutions
Principles of Accounting Volume 1: Financial Accounting

Principles of Accounting Volume 1: Financial Accounting

Mitchell Franklin, Patty Graybeal, Dixon Cooper 1st Edition
achievement 1,405 solutions
*

Transcript

-
00:01 Hello students, let us solve the problem.
00:02 Here is a question.
00:03 Maxi limited has acquired a vehicle under four years lease commencing on january 1st, 2019.
00:09 The vehicle remaining expected use for life is four years.
00:12 The payment due to the leaser in the amount of $50 ,000 per year beginning the december 31st, 2019.
00:19 The lease incremental borrowing rate is 20%.
00:22 We need to prepare a relevant general entry for the first year of a lease.
00:28 And the second thing we have to prepare a relevant financial statement exact in the first year of a lease.
00:34 So this is our question.
00:35 Let us start solving this.
00:37 First we have to prepare the journal entry.
00:39 So the format of journal entry will be date, account title, debit, credit.
00:51 So the date will be january 1st, 2019.
00:57 It is right to use asset to lease liability.
01:09 Amount comes to $129 ,437.
01:16 Narration will be to record lease.
01:28 And our second journal entry will be on december 31st, 2019.
01:34 It is interest expenses that is $129 ,437 into 20 % to lease liability...
Need help? Use Ace
Ace is your personal tutor. It breaks down any question with clear steps so you can learn.
Start Using Ace
Ace is your personal tutor for learning
Step-by-step explanations
Instant summaries
Summarize YouTube videos
Understand textbook images or PDFs
Study tools like quizzes and flashcards
Listen to your notes as a podcast
Continue solving this problem
Create a free account to:
  • View full step-by-step solution
  • Ask follow-up questions with Ace AI
  • Save progress and study later
Continue Free
Join the community

18,000,000+

Students on Numerade

Trusted by students at 8,000+ universities

Numerade

Get step-by-step video solution
from top educators

Continue with Clever
or



By creating an account, you agree to the Terms of Service and Privacy Policy
Already have an account? Log In

A free answer
just for you

Watch the video solution with this free unlock.

Numerade

Log in to watch this video
...and 100,000,000 more!


EMAIL

PASSWORD

OR
Continue with Clever