Rento-Corp (Pty) Ltd acquired a new five-ton truck in terms of an instalment sale agreement on 1 May 2022.The details are as follows: The vehicle's cash price R398 681 The terms of the lease indicate that Rento-Corp will pay a deposit on 1 May 2022 of R82 500 Initial direct costs incurred R21 855 The lease term 5 years Annual instalments R83 408 The first instalment is payable on 30 April 2023 The interest rate implicit in the lease 10% Assume that this rate will remain unchanged for the term of the lease. The following additional information is relevant to the agreement: Year Present value factor 1 0.9092 2 0.8264 3 0.7513 4 0.6830 5 0.6209 Part B: Rento-Corp (Pty) Ltd also leased out some of its machinery to a construction company on 1 January 2022.The details of the lease agreement are as follows: Lease term (operating lease) 5 years The cash price of the machinery leased R520 500 The monthly lease payments, beginning on 1 January 2022, were R8 630 Annual escalation 8% Required: For Part A, prepare the following in respect of Rento-Corp's instalment sale agreement in accordance with IFRS16 Leases: Q.1.1 The initial measurement of the lease liability. (8 1/2)
Added by Ebenezer
Close
Step 1
The lease payments are R83,408 per year for 5 years. We can use the present value factors given to calculate the present value of these payments. Present value = R83,408 * 0.9092 (Year 1) + R83,408 * 0.8264 (Year 2) + R83,408 * 0.7513 (Year 3) + R83,408 * Show more…
Show all steps
Your feedback will help us improve your experience
Breanna Ollech and 78 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
Sundown Rent-A-Car, a large automobile rental agency operating in the Midwest, is preparing a leasing strategy for the next six months. Sundown leases cars from an automobile manufacturer and then rents them to the public on a daily basis. A forecast of the demand for Sundown's cars in the next six months follows: Month March April May June July August Demand 420 400 430 460 470 440 Cars may be leased from the manufacturer for either three, four, or five months. These are leased on the first day of the month and are returned on the last day of the month. Every six months, the automobile manufacturer is notified by Sundown about the number of cars needed during the next six months. The automobile manufacturer has stipulated that at least 50% of the cars leased during a six-month period must be on the five-month lease. The cost per month on each of the three types of leases is $420 for the three-month lease, $400 for the four-month lease, and $370 for the five-month lease. Currently, Sundown has 390 cars. The lease on 120 cars expires at the end of March. The lease on another 140 cars expires at the end of April, and the lease on the rest of these expires at the end of May. Use LP to determine how many cars should be leased in each month on each type of lease to minimize the cost of leasing over the six-month period. How many cars are left at the end of August?
Ayushi S.
The Manes Company has two products. Product 1 is manufactured entirely in department X. Product 2 is manufactured entirely in department $Y$. To produce these two products, the Manes Company has two support departments: A (a materials-handling department) and B (a power-generating department) An analysis of the work done by departments $A$ and $B$ in a typical period follows: The work done in department A is measured by the direct labor-hours of materials-handling time. The work done in department B is measured by the kilowatt-hours of power. The budgeted costs of the support departments for the coming year are as follows: The budgeted costs of the operating departments for the coming year are $\$ 1,500,000$ for department $X$ and $\$ 800,000$ for department $Y$ Supervision costs are salary costs. Depreciation in department $\mathrm{B}$ is the straight-line depreciation of power-generation equipment in its 19 th year of an estimated 25 -year useful life; it is old, but wellmaintained, equipment. 1. What are the allocations of costs of support departments $A$ and $B$ to operating departments $X$ and $Y$ using (a) the direct method, (b) the step-down method (allocate department A first), (c) the step-down method (allocate department B first), and (d) the reciprocal method? 2. An outside company has offered to supply all the power needed by the Manes Company and to provide all the services of the present power department. The cost of this service will be $\$ 40$ per kilowatt-hour of power. Should Manes accept? Explain.
Alicia Soft Drink Company Limited uses a hybrid cost system. The preparation, cooking, and packaging departments are part of its production department, where the FIFO inventory method has been applied. The following information is available for the month of December: Preparation department: All production costs accrue uniformly throughout the process. Beginning WIP: 5,000 units (Stage of completion: 70%) Direct Materials: $26,000; Direct Labor: $10,900; Factory Overhead: $7,100 Units commenced in December: 2,000 units Completion of units in December: 1,500 units Ending WIP (60% complete as to conversion): 500 units Direct material introduced in December: $74,000 Direct Labor cost: $137,000 and Factory Overhead cost: $100,000 added in Cooking department: Raw materials are introduced initially at the commencement of the process. Conversion costs accrue uniformly throughout the process. A zero-defect policy has been announced. A quality assessor performs at a stage of completion of 40%. Beginning WIP: 1,500 units Direct Materials: $9,600; Conversion (50% complete): $3,600 Units commenced in June: 1,500 units Completion of units in June: 2,000 units Ending WIP (80% complete as to conversion): 400 units Material introduced in June: $26,000; Conversion cost added in June: $10,850 Packaging department: Raw materials and conversion costs accrue uniformly throughout the process. Beginning WIP: 2,400 units Units commenced in June: 2,600 units Completion of units in June: 4,400 units Ending WIP (20% complete as to conversion): 600 units The department has a normal production capacity of 10,000 units. Standards per unit of product manufactured: Material-A: 1 kg @ $20 Material-B: 2 kg @ $10 Labor: 1 hour @ $15 Factory overhead: variable (as labor hour) @ $15 Production cost: $70 During the month, the following production costs took place: a) Total Material-A purchased on account and issued to production as direct materials during the month amounted to 11,000 kg, where its cost was $19 per kg. b) Total Material-B purchased on account and issued to production as direct materials during the month amounted to 19,000 kg, where its cost was $11 per kg. c) Factory wages were $180,000. The number of working hours was 10,000, where all payrolls were classified as direct labor. d) Variable factory overhead occurred $120,000. Required: The cost of production report.
Umar Sohail Q.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD