Oriole Ltd., a public company following IFRS, recently signed a lease for equipment from Costner Ltd. The lease term is 7 years andrequires equal rental payments of $19,049 at the beginning of each year. The equipment has a fair value at the lease's inception of$104,500, an estimated useful life of 7 years, and no residual value. Oriole pays all executory costs directly to third parties. Theappropriate interest rate is 9%.Click here to view the factor table PRESENT VALUE OF 1.Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.Using tables, a financial calculator, or Excel functions, calculate the amount of the right-of-use asset and lease liability. Prepare theinitial entry to reflect the signing of the lease agreement and the first payment under the lease. (List all debit entries before credit entries.Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry"for the account titles and enter O for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places,e.g. 5,275.)Account Titles and ExplanationDebitCredit

The objective of the question is to calculate the amount of the right-of-use asset and lease…

Answered: Oriole Ltd., a public company following…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sheridan Ltd., a public company following IFRS, recently signed a lease for equipment from Costner Ltd. The lease term is 6 years and requires equal rental payments of $22,192 at the beginning of each year. The equipment has a fair value at the lease's inception of $110,800, an estimated useful life of 6 years, and no residual value. Sheridan pays all executory costs directly to third parties. The appropriate interest rate is 8%. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Using tables, a financial calculator, or Excel functions, calculate the amount of the right-of-use asset and lease liability. Prepare the initial entry to reflect the signing of the lease agreement and the first payment under the lease. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the…
An entity is a manufacturer of machinery. It uses lease agreements to sell its product. On January 1, 2019, the entity leased a machine to another entity under the following terms: • The lease term is 5 years. • The annual rental is P500,000 payable every January 1, 2019. • The machine has a cost to the entity of P1,600,000. • Implicit interest rate in the lease, known to the lessee, is 8%. The machine reverts back to the entity at the end of 5 years with an unguaranteed residual value of P400,000. The present value factors of 1 and annuity due at 8% for 5 periods are 0.68 and 4.21 respectively. What amount of sales revenue should be recognized by the entity?
ABC Company decided to enter the leasing business. The entity acquired a specialized packaging machine for P 2,300,000. On January 1,2020, the entity leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual lease payments are due each January 1 and the first payment was made on January 1,2020. The residual value of the machine is P 200,000. The lease terms are arranged so that a return of 12% is earned by the lessor. The present value of 1 at 12% for six periods is 0.51, the present value of an annuity in advance of 1 at 12% for six periods is 4.60 and the PV of an ordinary annuity of 1 at 12% for six periods is 4.11. What is the annual lease payment payable in advance required to yield the desired return?
ABC Company decided to enter the leasing business. The entity acquired a specialized packaging machine for P 2,300,000. On January 1,2020, the entity leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual lease payments are due each January 1 and the first payment was made on January 1,2020. The residual value of the machine is P 200,000. The lease terms are arranged so that a return of 12% is earned by the lessor. The present value of 1 at 12% for six periods is 0.51, the present value of an annuity in advance of 1 at 12% for six periods is 4.60 and the PV of an ordinary annuity of 1 at 12% for six periods is 4.11. What is the annual lease payment payable in advance required to yield the desired return? A.P 500,000 B.P 477,826 C.P 559,610 D.P 460,000
ABC Company decided to enter the leasing business. The entity acquired a specialized packaging machine for P 2,300,000. On January 1,2020, the entity leased the machine for a period of six years, after which title to the machine is transferred to the lessee. The six annual lease payments are due each January 1 and the first payment was made on January 1,2020. The residual value of the machine is P 200,000. The lease terms are arranged so that a return of 12% is earned by the lessor. The present value of 1 at 12% for six periods is 0.51, the present value of an annuity in advance of 1 at 12% for six periods is 4.60 and the PV of an ordinary annuity of 1 at 12% for six periods is 4.11 What is the annual lease payment payable in advance required to yield the desired return? A. P 500,000 B. P 477,826 C. P 559,610 D. P 460,000
An entity is a manufacturer of machinery. It uses lease agreements to sell its product. On January 1, 2019, the entity leased a machine to another entity under the following terms: • The lease term is 5 years. • The annual rental is P500,000 payable every January 1, 2019. • The machine has a cost to the entity of P1,600,000. • Implicit interest rate in the lease, known to the lessee, is 8%. The machine reverts back to the entity at the end of 5 years with unguaranteed residual value of P400,000. The present value factors of 1 and annuity due at 8% for 5 periods are 0.68 and 4.21 respectively. What amount should be recognized as interest income for 2019? 194,160 154,160 172,400 128,000 What amount gross income should be recognized by the entity for 2019? 555,000 827,000 955,000 700,000
Carla Vista Corporation, which uses ASPE, leased equipment it had manufactured at a cost of $143,000 for Sheridan, the lessee. The equipment's regular selling price is $182,000. The term of the lease is 15 years, beginning January 1, 2023, with equal rental payments of $27,065 at the beginning of each year. Sheridan pays all executory costs directly to third parties. The equipment's fair value at the lease's inception is $182,000. The equipment has a useful life of seven years with no residual value. The lease has an implicit interest rate of 15%, no bargain purchase option, and no transfer of title. Collectibility is reasonably assured, with no additional costs to be incurred by Carla Vista. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Prepare Carla Vista's January 1, 2023 journal entries at the inception of the lease and the entry at December 31, 2023, to record interest. (List all debit entries before…
Vaughn Company, as lessee, enters into a lease agreement on January 1, 2022, for equipment. The following data are relevant to the lease agreement: 1. The term of the noncancelable lease is 4 years, with no renewal option. Payments of $422,689 are due on January 1 of each year. 2. The fair value of the equipment on January 1, 2022 is $1,512,000. The equipment has an economic life of 6 years with no salvage value. 3. Vaughn depreciates similar machinery it owns on the straight-line basis. 4. The lessee pays all executory costs. 5. Vaughn’s incremental borrowing rate is 10%, but Vaughn knows that 8% is the lessor’s implicit interest rate. 6. Vaughn has a December 31 year-end. Required: a. Indicate the type of lease that Vaughn Company has entered into and why. b. Prepare an amortization table for Vaughn in Excel. c. Prepare the journal entries on Vaughn’s books for the first two years of the lease.
Crane Corporation, which uses ASPE, leased equipment it had specifically purchased at a cost of $190,000 for Oriole, the lessee. The term of the lease is 15 years, beginning January 1, 2023, with equal rental payments of $28,255 at the beginning of each year. Oriole pays all executory costs directly to third parties. The equipment's fair value at the lease's inception is $190,000. The equipment has a useful life of 16 years with no residual value. The lease has an implicit interest rate of 15%, no bargain purchase option, and no transfer of title. Collectibility is reasonably assured, with no additional costs to be incurred by Crane. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Using (1) tables, (2) a financial calculator, or (3) Excel functions, calculate the PV of the lease payments and prepare Crane's January 1, 2023 journal entries at the inception of the lease. (List all debit entries before credit…
Sheridan Corporation, which uses ASPE, leased equipment it had manufactured at a cost of $150,100 for Bonita, the lessee. The equipment's regular selling price is $191,000. The term of the lease is 11 years, beginning January 1, 2023, with equal rental payments of $27,724 at the beginning of each year. Bonita pays all executory costs directly to third parties. The equipment's fair value at the lease's inception is $191,000. The equipment has a useful life of seven years with no residual value. The lease has an implicit interest rate of 11%, no bargain purchase option, and no transfer of title. Collectibility is reasonably assured, with no additional costs to be incurred by Sheridan. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Prepare Sheridan's January 1, 2023 journal entries at the inception of the lease and the entry at December 31, 2023, to record interest. (List all debit entries before credit…
Rachel Company used leases as a method of selling products. In the current year, Rachel Company completed construction of a construction equipment. At the beginning of the current year, the construction equipment was leased on a contract specifying that ownership of thereon will transfer to the lessee at the end of the lease period. The annual lease payments do not include executory costs. Original cost of the construction equipment is P9,000,000. Lease payments payable at beginning of each year is P2,000,000. Estimated residual value is P1,000,000. Implicit interest rate is 12%, 10-year lease term. Present value of an annuity due of 1 at 12% for 10 periods is 6.33 and PV of 1 at 12% for 10 periods is 0.32. 1. What amount should be reported as gross profit on sale? 2. How much is the interest income for the current year?
Wilcox Ltd finance company purchases a machine for $160,000 at the request of Upland Manufacturing Ltd, which then leases it to Upland for $60,000 per annum for three years. The payments are to be made at the commencement of each year including the first year of the lease period. Wilcox Ltd incurs costs of $1,500 to establish the lease. The lease is non-cancellable and classified as a finance lease by the lessor. The interest rate implicit in the lease is 10%. There is no guaranteed or unguaranteed residual value at the end of the lease period. Required: Prepare the journal entries for Wilcox Ltd to record the initial recognition of lease related assets and interest income for three years under AASB 16/IFRS 16

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