On 01-Jan-23 Smith Ltd contracted to lease a machine for 4 years. Annual lease payments (commencing 31-Dec-23) are £40,000. Annual interest rates are 7.5%. a) b) c) d) Required: Show Smith's lease repayment schedule for this contract. Show the accounting entries required to record Smith's lease at the end of the first year. Amend Smith's balance sheet for 31-Dec-23 (shown below) to include this lease transaction. For Y/e 31-Dec-23, calculate Smith's gearing ratios before and after the addition of the lease transaction. Smith Ltd SFP at 31-Dec-23 £'000 £'000 NCA 200 ISC 250 Reserves 120 CA 350 Profit/Loss 50 NCL CL 100 30 Assets 550 Equity & Liabilities 550

On 01-Jan-23 Smith Ltd contracted to lease a machine for 4 years. Annual lease payments (commencing 31-Dec-23) are £40,000. Annual interest rates are 7.5%. a) b) c) d) Required: Show Smith's lease repayment schedule for this contract. Show the accounting entries required to record Smith's lease at the end of the first year. Amend Smith's balance sheet for 31-Dec-23 (shown below) to include this lease transaction. For Y/e 31-Dec-23, calculate Smith's gearing ratios before and after the addition of the lease transaction. Smith Ltd SFP at 31-Dec-23 £'000 £'000 NCA 200 ISC 250 Reserves 120 CA 350 Profit/Loss 50 NCL CL 100 30 Assets 550 Equity & Liabilities 550

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 9RE: Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would...

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Use the information in RE20-3. Prepare the journal entries that Richie Company (the lessor) would make in the first year of the lease assuming the lease is classified as a sales-type lease. Assume that the lessee is required to make payments on December 31 each year. Also assume that Richie had purchased the equipment at a cost of 200,000.
A finance lease agreement calls for quarterly lease payments of $5,133 over a 15-year lease term, with the first payment on July 1, the beginning of the lease. The annual interest rate is 8%. Both the present value of the lease payments and the cost of the asset to the lessor are $182,000. Required: a. Prepare a partial amortization table up to the October 1 payment. b. What would be the amount of interest expense (revenue) the lessee (lessor) would record in conjunction with the second quarterly payment on October 1? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a partial amortization table up to the October 1 payment. Note: Enter all amounts as positive values. Round your answers to the nearest whole dollar. Date July 1 July 1 October 1 Lease Payment Effective Interest Decrease in Outstanding balance balance Required A Required B >
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