Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(b) Haider Construction Company needed a Mini Excavator for its project. The Project Engineer suggested that instead of hiring the machine on hourly rent they
(b) Haider Construction Company needed a Mini Excavator for its project. The Project Engineer suggested that instead of hiring the machine on hourly rent they should purchase their own machine through finance lease as the machine is going to be utilized in upcoming projects also. The company approached the bank for leasing the machine. The bank agreed to lease the machine on 5 years lease period with annual installment to be paid at the end of each year. The deal occurred on 1st January 2012. The price of the machine was Rs 9,000,000. The rate of interest was fixed as KIBOR plus 5%. The KIBOR rate on that date was 7%. The machine has a useful life of 30,000 hours. The depreciation is to be charged on units of output method. According to the Project Engineer the machine is expected to be utilized 2,500 hours per years on average. Please ignore salvage value, Required: 1. Construct amortization schedule for 5 years lease period. 2. Journal entries to be recorded on the books of both the lessor and lessee. Entries for depreciation are also to be recorded (6)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started