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(Solved by Expert Tutors) This is a question about leasing. Thank you?Cheyanne Ltd has decid


Cheyanne Ltd has decided to lease a photocopier from Derek

Ltd (a manufacturer company) over a 4 year lease period from 1 July 2013 to 30 June 2017. Derek Ltd had manufactured the copier? at a cost of $27,000. The economic life of the asset is 5 years.

The terms of the lease are: $20,000 per annum over the 4 years with the first lease payment payable on 1 July 2013 and all remaining payments will be made at the end of each financial year. Residual value guaranteed by Cheyanne Ltd is $4,000. Estimated residual value when the photocopier is returned to Derek Ltd is $9,000. The interest rate implicit in the lease contract is 15%.

At the end of the lease, Cheyanne Ltd returns the photocopier to Derek Ltd. Assume that the lease meets the requirements of a finance lease.

  • 1. Set out Derek Ltd?s schedule of receipts and Cheyanne Ltd?s schedule of payments for the lease period.

  • 2. Record the journal entries in the books of Derek Ltd at 1 July, 2013 and for the year ending 30 June 2014.

 

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Apr 19, 2020

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