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SA Ltd manufactures equipment for sale or lease to other companies. On 1 January 20X1, SA Ltd entered into a sales-type lease agreement with a
SA Ltd manufactures equipment for sale or lease to other companies. On 1 January 20X1, SA Ltd entered into a sales-type lease agreement with a customer.
The market selling price of the equipment is $125,000. The cost to SA Ltd is $100,000. Each equipment has a useful life of 5 years, with residual value expected to be insignificant. Fair market interest rate is 6% per annum.
This lease agreement is for 5 years with annual payment of $29,675, commencing 31 December 20X1.
Required:
- Prepare the journal entries for SA Ltd on 1 January 20X1
- Assume that in order to promote sale of the equipment, SA Ltd advertised that it will charge an interest of only 3% per annum. Prepare the journal entries for SA Ltd on 1 January 20X1
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