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Find the journal entry prepared by win to record the lease

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Reference no: EM132972132

Not Ordinary Drones (NOD) , Inc., a lessor, leased a drone to Worldz Information Network, Ltd., [WIN], a lessee, on January 1, 2019. The following information relates to the leased asset and the lease agreement:

Fair value of leased drone $Undisclosed
Lease 10 years
Useful life 15 years
Payment Due January 1
Payment frequency Annual
Annual Instalments starting January 1, 2019 $33,000
Estimated residual value at end of the lease, [as stated in the problem] $23,600
Interest rate implicit in the lease [unknown to the lessee] 7%
Interest rate incremental to the lessee 8%
Ownership of drone reverts to lessor at end of lease term
Year end for both companies December 31
Amortization method Straight line
Accounting standards used - NOD ASPE
- WIN IFRS

REQUIRED: Select the one best answer to each of the questions listed below and input it in the computer.

below that the residual value of the leased asset was guaranteed.

Problem 1: The journal entry prepared by WIN to record the lease contract on January 1, 2019 would be

a. DEBIT-Right of Use Assets [$342,000]; CREDIT-Obligation Under Capital Lease [$342,000].
b. DEBIT-Right of Use Assets [$250,079]; CREDIT-Obligation Under Capital Lease [$250,079].
c. DEBIT-Right of Use Assets [$239,147]; CREDIT-Cash [$239,147].
d. DEBIT-Right of Use Assets [$330,000]; CREDIT-Obligation Under Capital Lease [$330,000].
e. DEBIT-Right of Use Assets [$239,147]; CREDIT-Obligation Under Capital Lease

Problem 2: What would be the amount of interest expense for 2019 if the residual value was guaranteed by the lessee? [Round to the nearest dollar]

a. $17,366.
b. $20,799.
c. $26,400.
d. $16,740.
e. $19,032.

Problem 3: The amount to be recorded as depreciation expense for 2019 if the residual value was guaranteed by the lessee would be [Round to the nearest dollar]

a. $23,915.
b. $15,943.
c. $17,333.
d. $22,648.
e. $25,991

Reference no: EM132972132

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