Solution-Prepare amortization schedule until end of lease

Prepare amortization schedule until end of lease term

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Reference no: EM132560831

Question - On 1 January 2018 ANNA Bhd entered into a lease agreement to lease a machine from ZUZA Bhd. The terms of the agreement included:

(i) non-cancellable lease term of five years, with no option to buy the machine at the end of lease term;

(ii) lease rental of RM40,000 per year to be paid at end of year, commence on 31 December 2018; and

(iii) the lease rental was calculated and mutually agreed upon based on 10% rate of return to ZUZA Bhd.

The machine is expected to have an estimated useful life of five years. Both companies use the straight-line method of depreciation. The fair value of the machine at the inception date is RM155,000.

PVOA (n=5, i=10%) = 3.7908

REQUIRED - Round your answer to two decimal points.

(a) Determine the present value of lease payments and prepare journal entries at 1 January 2018 for ANNA Bhd.

(b) Prepare amortization schedule until end of lease term and prepare journal entries for ANNA Bhd to record leasing activities during the first and second year of the lease.

(d) Prepare journal entries at 1 January 2018 for ZUZA Bhd.

(e) Prepare journal entries for ZUZA Bhd to record leasing activities during the first and second year of the lease.

Reference no: EM132560831

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Prepare amortization schedule until end of lease term

Reference no: EM132560831

Reference no: EM132560831

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