Question
GI has given the machinery on lease to BD Co for extraction of minerals. The lease started on 1 st January 2020 and would end
GI has given the machinery on lease to BD Co for extraction of minerals. The lease started on 1st January 2020 and would end on 31.12.2021. The lessor has classified the lease as capital lease. The implicit rate for GI is 10%p.a. The annual lease rental is 75,000 payable at the start of each year. GI has provided you the following amortisation schedule for its lease.
| Date | Lease Rental | Interest (10%) | Principle | Closing Bal |
| 01.01.2020 |
|
|
| 205,166 |
| 01.01.2020 | 75,000 | - | 75,000 | 130,166 |
| 31.12.2020 | 75,000 | 13,017 | 61,983 | 68,183 |
| 31.12.2021 | 75,000 | 6,818 | 68,183 | 0 |
Required
- Complete the amortization schedule above
- What is the lease value ?
- How much are the annual rentals?
- Pass the journal entries in the books of Lessor ( GI ) to record the lease and receipt of first installment on 1.1.2020
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Financial Accounting
Authors: Walter T. Harrison, Themin Suwardy, Wendy Tietz, Charles Horngren, C. Thomas
12th Global Edition
1292412909, 9781292412900
