Rex Ltd enters into a non-cancellable four-year lease agreement with Boing Ltd on 1 July 2021,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Rex Ltd enters into a non-cancellable four-year lease agreement with Boing Ltd on 1 July 2021, the beginning of the financial year of both companies. The agreement is for leasing an aircraft that is expected to have an economic life of five years, after which time it will have no residual value. There is a bargain. purchase option, which Rex Ltd will be able to exercise at the end of year four, for $20 000. Boing Ltd is aircraft manufacture. The cost of the aircraft to Boing Ltd is $400 000. There are to be four annual payments of $125 000, the first being made on 30 June 2022. The aircraft is to be depreciated on a straight-line basis. The rate of interest implicit in the lease is 12 per cent. Required a) Calculate the present value of lease payments. Show the calculations. (2 Marks) b) Prepare the journal entries in the books of Rex Ltd on 30 June 2022. (5 Marks) c) Prepare the journal entries in the books of Boing on 1 July 2021. (4 Marks) Rex Ltd enters into a non-cancellable four-year lease agreement with Boing Ltd on 1 July 2021, the beginning of the financial year of both companies. The agreement is for leasing an aircraft that is expected to have an economic life of five years, after which time it will have no residual value. There is a bargain. purchase option, which Rex Ltd will be able to exercise at the end of year four, for $20 000. Boing Ltd is aircraft manufacture. The cost of the aircraft to Boing Ltd is $400 000. There are to be four annual payments of $125 000, the first being made on 30 June 2022. The aircraft is to be depreciated on a straight-line basis. The rate of interest implicit in the lease is 12 per cent. Required a) Calculate the present value of lease payments. Show the calculations. (2 Marks) b) Prepare the journal entries in the books of Rex Ltd on 30 June 2022. (5 Marks) c) Prepare the journal entries in the books of Boing on 1 July 2021. (4 Marks)
Expert Answer:
Answer rating: 100% (QA)
a Present value of lease payment Working note1 Lease liability sheet Year Lease payment PVIF12 PV of ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
Posted Date:
Students also viewed these finance questions
-
On 1 July 2019, Helvelyn Ltd enters into a lease to acquire use of a machine. The lease agreement specifies that the company will make four lease payments of 37,600 each, on 30 June 2020, 2021, 2022...
-
Prepare general journal entries on the books of both Mirror Co. and the other party (either Rosman Co., Kaw County Bank, or Lawrence Bank) for each of the following transactions: June 1 Rosman Co....
-
On 1 July 2019, Lachie Ltd enters into a loan agreement with SK Bank to borrow USD$5million. Lachie Ltd wishes to use these funds to construct new machinery. The interest on the loan is at a fixed...
-
Suppose that In Example 18.6 the electrical firm does not have enough prior information regarding the population mean length of life to be able to assume a normal distribution for p. The firm...
-
A dealer buys tooling machines from a manufacturer and resells them to its customers. a. The manufacturer sets a list or catalogue price of $12,000 for a machine. The manufacturer offers its dealers...
-
Provide a mechanism that explains formation of the following products. CI HCI (concdCI+
-
Use target pricing to analyze data (Learning Objective 3) Consider SnowDreams from S8-3. Assume that SnowDreams reputation has diminished and other resorts in the vicinity are charging only $65 per...
-
Dock Guard, which uses a standard cost accounting system, manufactured 200,000 boat fenders during the year, using 1,450,000 m of extruded vinyl purchased at $1.05 per metre. Production required...
-
I am trying to figure out the best way to approach this using Walmart's current 2 0 2 4 1 0 K filing Report for CEO At the most recent strategic planning meeting, the board of directors of your...
-
Adriaan Taylor Corporation is a newly formed entity that engages in the purchase and resale of amphibious tour vehicles. Purchases for the first year of operation were as follows: Date Purchases...
-
Mu Co. Date: 31 August 2023 Details: Raw material inventory (aluminium): Cost: 50,000 Replacement cost: 48,000 Finished goods inventory: Product Psi Omega Direct costs 75,000 65,000 Proportion of...
-
Consider the linear program min x1 + x2 s.t. x1 x21, x1, x2 0. a) Determine all solutions of (2). b) Transform (2) into standard form. c) For 70 determine the solution (XT, YT, ST) of the central...
-
calculate the after tax cost of debt for these options (Use the approximation method). Subsidy Tax Rate is 15% on these $1,000 face value bonds. My investment banker has also told me their flotation...
-
Two (2) examples of how good inventory control can be maintained.
-
You are currently six years away from the date you planned to retire. Unfortunately, you were in a work-related accident two years ago and have not been able to work since. You went to court and the...
-
Some MPs are more interested in education policies than in childcare programs. The MPs propose that we should eliminate the higher education debts of women. In line with the human capital model, what...
-
marketing management
-
In Exercises, find the equation of the tangent line at the given point on each curve. 2y 2 - x = 4; (16, 2)
-
How is the potentially dilutive effect of convertible preferred stock reflected in EPS calculations by the if-converted method? How is this different from the way convertible bonds are considered?
-
Universal Calendar Company began the year with accounts receivable and inventory balances of $100,000 and $80,000, respectively. Year-end balances for these accounts were $120,000 and $60,000,...
-
In preparation for developing its statement of cash flows for the year ended December 31, 2021, Rapid Pac, Inc., collected the following information: Required: 1. In Rapid Pac?s statement of cash...
-
Bank Reconciliation (Partial)} The cash account for Feldman Company contains the following information for April: \section*{Required:} Assuming there were no deposits in transit at March 31 and that...
-
Bank Reconciliation} Valentine Investigations has the following information for its cash account: Valentine's bank statement for February contained the following information: A comparison of company...
-
What three elements make up audit risk? Define each.
Study smarter with the SolutionInn App