Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Accounting Problem Background Information OrioleLeasing Limited, which has a fiscal year end of October 31 and follows IFRS 16, signs an agreement on January 1,

Accounting Problem

Background Information

OrioleLeasing Limited, which has a fiscal year end of October 31 and follows IFRS 16, signs an agreement on January 1, 2020, to lease equipment to Irvine Limited. The following information relates to the agreement.

1.The term of the non-cancellable lease is six years, with no renewal option. The equipment has an estimated economic life of eight years.

2.The asset's cost toOriole, the lessor, is $316,000. The asset's fair value at January 1, 2020, is $316,000.

3.The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $45,549, which is not guaranteed.

4.Irvine Limited, the lessee, assumes direct responsibility for all executory costs.

5.The agreement requires equal annual rental payments, beginning on January 1, 2020.

6.Collectibility of the lease payments is reasonably predictable. There are no important uncertainties about costs that have not yet been incurred by the lessor.

Instructions

a) Assuming thatOrioleLeasing desires a11% rate of return on its investment, use time value of money tables, a financial calculator, or Excel functions to calculate the amount of the annual rental payment that is required.(Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.)

b) Refer to Part B.png

Part B.png

image text in transcribedimage text in transcribedimage text in transcribed
Prepare an amortization schedule using a spreadsheet that would be suitable for the lessor for the lease term. (Round answers to 0 decimal places, e.g. 5,275.) Oriole Leasing Corporation (Lessor) Lease Amortization Schedule Annual Lease Interest Net Balance Payment on Net Investment of Net Date Plus URV Investment Recovery Investment 1/1/20 $ 1/1/20 1/1/21 1/1/22 1/1/23 1/1/24 1/1/25 12/31/25 $Prepare all of the journal entries for the lessor for 2020 and 2021 to record the lease agreement, the receipt of lease payments, and the recognition of income. Assume that Oriole prepares adjusting journal entries only at the end of the fiscal year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. Round answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/20 (To record inception of lease and collection of lease payment.) (To record interest.) (Collection of lease payment.) (To record interest.)Prepare a comparative partial statement of income for Oriole for fiscal years 2020 and 2021. Oriole Leasing Limited Statement of Income (partial) For the Year Ended October 31, 2021 2020 $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Financial Numbers Game

Authors: Charles W Mulford, Eugene E Comiskey

1st Edition

0471770736, 9780471770732

More Books

Students also viewed these Accounting questions