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Question 4 ( 1 2 marks ) Accounting for leases The following details relate to a non - cancellable right - to - use lease
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Accounting for leases
The following details relate to a noncancellable righttouse lease agreement between EastWest Ltdthe Lessor and SeaWater Ltdthe Lessee for the lease of a small metre, coastal vehicle transport ferry built in
Inception date: July
Term of Lease: Years
Ten annual lease payments in arrears the first due on June : $
BargainPurchase Option price at end of lease term: $
Guaranteed residual: $
Initial Lease Inception Payment, payable July : $
Contracted Service & Maintenance Costs per year: $
Remaining economic life of leased equipment: years
Fair value of asset at July : $
Required:
a Prove that the implicit rate of interest is Refer to Present value tables provided
at see the appendix page at the end this exam paper marks
b Prepare a part Lease Schedule of Payments table for the period from Lease Inception July for the first three years, then show the applicable journal entries on the lessees books for the first three years of lease payments & SeaWater Ltds annual accounting period ends on June
marks
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