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Answer all parts complete with full steps to get 100% feedback!! On January 2021 Bob Company sells an item of machinery to Jaison Company for
Answer all parts complete with full steps to get 100% feedback!!
On January 2021 Bob Company sells an item of machinery to Jaison Company for its fair value of $300,000. The asset had a carrying amount of $120,000 prior to the sale. The sale represents the satisfaction of a performance obligation, in accordance with IFRS 15 Revenue from Contracts with Customers. Bob Company enters on to a contracte with Jaison Company for the right to use the asset for the next five years. Annual payments of $50,000 are due at the end of each year. The interest rate implicit in the lease is 10%. The present value of the annual lease payments is $190,000. The remaining useful life of the machine is much greater than the lease term. Required: 1. Explain how it will be recorded in the books of Bob Company and show the necessary journal entries. (4.5 marks) 2. Why do companies prefer lease financing instead of direct purchase? Explain any three valid reasons. (1.5marks) Step by Step Solution
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