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Calculate annual lease payment that HAP Limited would charge

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Reference no: EM132885121

Question - HAP Limited is a manufacturer of trucks. On 1 January 2020 it leases a truck to a lessee under a ?ve-year non-cancellable lease agreement. The following data is relevant:

1. Six equal annual payments that are due on 1 January each year (with the first payment on 1 January 2020) provide HAP Limited with an 4% return on investment.

2. On 1 January 2020, the fair value of the truck is $600,000, and the cost to HAP Limited is $530,000.

3. HAP Limited classifies the lease as a sales-type finance lease.

Required -

a. Calculate the annual lease payment that HAP Limited would charge.

b. Prepare the journal entries for HAP Limited on 1 January 2020.

c. Calculate the interest income for HAP Limited in the year of 2020.

Reference no: EM132885121

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