Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

messenger media/?thread id = 100001850204963&attachment_id=1794111072385648message idemid.%24CAAAAAAfpE618da C Question 15 (12 points) Saved On 1 July 2020, Sandy Ltd enters into a non-cancellable five-year lease agreement

image text in transcribed
messenger media/?thread id = 100001850204963&attachment_id=1794111072385648message idemid.%24CAAAAAAfpE618da C Question 15 (12 points) Saved On 1 July 2020, Sandy Ltd enters into a non-cancellable five-year lease agreement with Bill Ltd. The lease is for an item of machinery. The machinery is expected to have an economic life of six years, after which time it will have no residual value. There is a bargain purchase option, which Sandy Ltd will be able to exercise at the end of the fifth year, for $80 000. There are to be five annual payments of $100 000, the first being made on 30 June 2021. Included within the $100 000 lease payments is an amount of $10 000 representing payment to the lessor for the insurance and maintenance of the machinery. The machinery is to be depreciated on a straight-line basis. The rate of interest implicit in the lease is 12 per cent. Additional Information: Present value of an annuity in arrears of $1 for five years at 12 per cent = 3.6048 Present value of $1 in five years at 12 per cent - 0.5674 Required Part A - Prepare the journal entries for 1 July 2020 and the year ending 30 June 2021 in the books of Sandy Ltd (round up to the nearest dollar). Show your workings and calculations O messenger media/?thread id = 100001850204963&attachment_id=1794111072385648message idemid.%24CAAAAAAfpE618da C Question 15 (12 points) Saved On 1 July 2020, Sandy Ltd enters into a non-cancellable five-year lease agreement with Bill Ltd. The lease is for an item of machinery. The machinery is expected to have an economic life of six years, after which time it will have no residual value. There is a bargain purchase option, which Sandy Ltd will be able to exercise at the end of the fifth year, for $80 000. There are to be five annual payments of $100 000, the first being made on 30 June 2021. Included within the $100 000 lease payments is an amount of $10 000 representing payment to the lessor for the insurance and maintenance of the machinery. The machinery is to be depreciated on a straight-line basis. The rate of interest implicit in the lease is 12 per cent. Additional Information: Present value of an annuity in arrears of $1 for five years at 12 per cent = 3.6048 Present value of $1 in five years at 12 per cent - 0.5674 Required Part A - Prepare the journal entries for 1 July 2020 and the year ending 30 June 2021 in the books of Sandy Ltd (round up to the nearest dollar). Show your workings and calculations O

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

Entrepreneurial Finance And Accounting For High-Tech Companies

Authors: Frank J Fabozzi

1st Edition

0262336901, 9780262336901

More Books

Students also viewed these Finance questions