Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Supply Ltd entered into a non-cancellable five-year lease arrangement with Customer Ltd on 1 July 2019. The leased asset is a machine with an estimated

Supply Ltd entered into a non-cancellable five-year lease arrangement with Customer Ltd on 1 July 2019. The leased asset is a machine with an estimated useful life of six years and a salvage value of zero. There are to be five annual lease payments of $90,000, the first being made on 30 June 2020. Customer Ltd determined that this contract contains a lease. Customer Ltd will be able and likely to exercise an option to purchase the leased asset at the end of the lease term for $30,000. This price is expected to be well below the fair value of the machine when the option becomes exercisable. The implicit interest rate is 12%. Do not include commas and dollar sign ($) in your answer. Present $1,000 as 1000.

1.What is the the balance of Lease Liability at the inception date of the lease?

2.Assuming Customer Ltd used straight-line method, what is the depreciation expense that the company should record for the financial year ended on 30 June 2020?

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

Financial Accounting

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

9th Edition

1118334329, 978-1118334324

More Books

Students also viewed these Accounting questions