Cash paymentofinitialdirectcosts 467100 467100 9414

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Unformatted text preview: g plant Dr 467 100 Cash Cr (Purchase of plant from Ultramarine Ltd) Lease receivable Dr 467 100 Processing plant Cr (Recognition of lease agreement) Lease receivable Dr Cr Cash (Payment of initial direct costs) 467 100 467 100 9 414 9 414 Dr Cr Cr Cr 165 000 121 409 28 591 15 000 Maintenance expense Dr Cash Cr (Payment of maintenance costs) 15 000 15 000 Cash Lease receivable Interest revenue Reimbursement revenue (First lease receipt) 5 Problem 14.1 Lease classification; accounting and disclosures ALBERT LTD – BIRKENHEAD LTD 1. Lease classification The lease should be classified by both parties as a finance lease as substantially all of the risks and rewards incidental with ownership of the bulldozer have transferred from the lessor to the lessee as indicated by the following: the lease is non‐cancellable (by definition), the lease term, at 62.5%, which is, arguably, a major part of the bulldozer’s economic life, but the present value of the minimum lease payments is substantially all of the fair value of the asset at the lease inception, as calculated below: PV of MLP = $8 000 x 3.8897 [T2 9% 5 yrs] + $3 600 x 0.6499 [T1 9% 5yrs] 2. this is equal to 96.1% of fair value at lease inception Date 1 July 2010 30 June 2011 30 June 2012 30 June 2013 30 June 2014 30 June 2015 = $33 458 MLP $ 8 000 8 000 8 000 8 000 11 600 43 600 Albert Ltd (Lessee) Lease payment schedule Interest Liability expense reduction $ 3 011 2 562 2 073 1 539 958 10 143 $ 4 989 5 438 5 927 6 461 10 642 33 457 Balance of liability $ 33 457 28 468 23 030 17 103 10 642 6 3. Year ended 1 July 2010 30 June 2011 30 June 2012 30 June 2013 30 June 2014 30 June 2015 Receivable $ 8 000 8 000 8 000 8 000 15 200 47 200 Birkenhead Ltd (Lessor) Lease receipts schedule Interest Receivable revenue reduction $ $ 3 222 4 778 2 792 5 208 2 323 5 677 1 812 6 188 1 254 13 946 11 403 35 797 4. Journal entries for Birkenhead Ltd (lessor) 1 July 2010 Bulldozer Dr Cash Cr (purchase of bulldozer) Lease receivable Dr Bulldozer Cr Cash Cr (recognition of lease receivable and payment of initial direct costs) 30 June 2011 Cash Dr Lease receivable Cr Interest revenue Cr (receipt of first lease payment) Journal entries for Albert Ltd (lessee) 1 July 2010 Leased asset Dr Lease liability Cr (recognition of leased asset and lease liability) 30 June 2011 Lease liability Dr Interest expense Dr Cash Cr (first lease payment) Balance of receivable $ 35 797 31 019 25 811 20 134 13 946 34 797 34 797 35 797 34 797 1 000 8 000 4 778 3 222 33 457 33 457 4 989 3 011 8 000 7 Depreciation expense Dr 5 971 Accumulated depreciation Cr (depreciation of leased assets [(33 457 – 3 600) 5] Problem 14.3 1. Auckland Ltd (Lessor) Schedule of Lease Receipts Year ending MLR Interest Reduction of revenue receivable (10%) 1/7/07 1/7/08 50 000 21 252 28 748 1/7/09 50 000 18 377 31 623 1/7/10 50 000 15 214 34 786 1/7/11 50 000 11 736 38 264 7 906 79 094 1/7/12 87 000 287 000 74 485 212 515 5 971 Balance of receivable 212 515 183 767 152 144 117 358 79 094 ‐ 2. Auckland Ltd (Lessor) General Journal 2007 1 July Lease receivable Cost of goods sold Inventory Sales revenue *195 000 – (PV of Unguaranteed RV$12 000 x 0.6209) **212 515 – (PV of Unguaranteed RV$12 000 x 0.6209) Lease arrangement expense Cash 2007/08 Executory costs expense Cash 2008 30 June` Interest receivable Interest revenue Executory costs reimbursement revenue receivable Executory costs reimbursement revenue Dr Dr Cr Cr 212 515 *187 549 Dr Cr 1 500 1 500 Dr Cr 7 200 7 200 Dr Cr 21 252 21 252 Dr Cr 7 500 7 500 195 000 **205 064 8...
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This homework help was uploaded on 04/04/2014 for the course ACCY 200 taught by Professor Kevin during the Three '12 term at University of Wollongong, Australia.

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