Question
On July 1, 2023, Air West Coast Ltd decided to lease an aircraft from Dubai Aerospace Enterprise, an enormous conglomerate in the aircraft leasing space
On July 1, 2023, Air West Coast Ltd decided to lease an aircraft from Dubai Aerospace Enterprise, an enormous conglomerate in the aircraft leasing space who purchased the aircraft for cash. The term of the lease is 20 years. The implicit interest rate in the lease is 10 per cent. It is expected that the aircraft will be scrapped at the end of the lease term. The fair value of the aircraft at the commencement of the lease is $2,428,400. The lease is non-cancellable, Air West Coast Ltd returns the aircraft to Dubai Aerospace Enterprise at the end of the lease, Dubai Aerospace Enterprise requires a lease payment of $300,000 on the inception of the lease on July 1, 2023, and lease payments of $250,000 on June 30 each year, starting on June 30, 2024. There is no residual payment required.
Required
- Provide the journal entries for the lease in the books of Air West Coast Ltd as at July 1, 2023.
- Provide the journal entries for the lease in the books of Dubai Aerospace Enterprise as at July 1, 2023.
- Provide the journal entries in the books of Air West Coast Ltd in the final year of the lease, i.e., in 20 years.
- Provide the journal entries in the books of Dubai Aerospace Enterprise for the final year of the lease, i.e., in 20 years.
- Provide the journal entries for the lease in the books of Air West Coast Ltd as at July 1, 2023. No post ref. required. Refer to the provided Chart of Accounts for the appropriate account names.
Marks: 4
General Journal Air West Coast Ltd
Page 103
| Date | Account | Post Ref | Debit | Credit |
| 2023 |
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| To record recognition of the leased asset | |||
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| To record lease payment | |||
- Provide the journal entries for the lease in the books of Dubai Aerospace Enterprise as at July 1, 2023. No post ref. required. Refer to the provided Chart of Accounts for the appropriate account names.
Marks: 6
General Journal Dubai Aerospace Enterprise
Page 10
| Date | Account | Post Ref | Debit | Credit |
| 2023 |
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| To record acquisition of the aircraft | |||
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| To record the substitution of a lease receivable for the aircraft | |||
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| To record receipt of the lease payment | |||
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Internal Auditing Assurance And Advisory Services
Authors: Kurt R. Reding, Paul J. Sobel, Urton L. Anderson, Michael J. Head, Sridhar Ramamoorti, Mark Salamasick, Cris Riddle
3rd Edition
0894137409, 978-0894137402
