Question
Taylor Ltd entered into a lease arrangement with Swift Ltd on 1 July 2019 for four years. A lease payment of $85,000 are made on
Taylor Ltd entered into a lease arrangement with Swift Ltd on 1 July 2019 for four years. A lease payment of $85,000 are made on 30 June every year, with first payment to be made on 30 June 2020. The implicit interest rate in the lease is 8%. Swift Ltd determined that this contract is non-renewable and contains a lease component. The leased equipment is expected to have an economic life of seven years, after which time it will have an expected salvage value of $15,000. The reporting date for both Taylor Ltd and Swift Ltd is 30 June. Below was the journal entry recorded on the book of Swift Ltd on 1 July 2019:
Dr Right-of-use Asset $348,500
Cr Lease Liability $348,500
-
What is the interest expense that Swift Ltd should record for the financial year ended on 30 June 2020?
-
What is the depreciation expense that Swift Ltd should record for the financial year ended on 30 June 2020?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Essentials Of Federal Taxation 2019
Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver
10th Edition
1260189988, 1260189678, 9781260189674, 978-1259917103, 125991710X, 978-1260190045
