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Journal entries for the year ending dec in the books

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Reference no: EM132920235

Alfalah Leasing Limited (the lessor) has entered into a five years agreement with Hashim Engineering Works (the lessee) to lease a machine with an expected useful life of 7 years. The cost of machine is Rs.609, 000. The following information relating to lease transaction is available:

  • The lease contains a purchase bargain option at Rs.100,000. At the end of the lease term, the value of the machine will be Rs.200,000
  • Lease installments of Rs.142,000 are payable annually, in arrears, on Dec, 31.
  • The implicit interest is to be computed at an annual rate of 10.5%.

Required

Problem 1: Prepare the Amortization table for the lease agreement.

Problem 2: Journal entries for the year ending Dec. 31, 2018 in the books of lessor and lessee. Ignore tax.

Reference no: EM132920235

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