User Account

All Pages

Prepare journal entries of STU Ltd for the financial year

Assignment Help Accounting Basics
Reference no: EM132535392

Question - Equipment Ltd leased new advanced computer equipment to STU Ltd on 1 January 2019. STU Ltd has to pay annual rental of $290,000 starting at 1 January 2019. It is a four years lease with ultimate rental payment failing on 1 January 2022. At the end of lease term, STU Ltd has the option of purchasing the computer equipment for $20,000, and it is highly probable that STU Ltd will exercise such option. On the other hand, , STU Ltd will guarantee to Equipment Ltd a residue value of $160,000, Also, STU Ltd has to pay insurance cost, repair and maintenance expenditure on the computer equipment. Before the execution of lease, STU Ltd paid $16,500 as legal service fee and $32,500 to intermediates as negotiation of lease term and condition.

The equipment has an expected useful life of 5 years, while STU Ltd purchase the computer equipment from the market, the cash price is $1,160,000.

The market borrowing rate at commencement of lease is 11%.

Required -

a. In Equipment Ltd's point of view, explain and determine whether the above arrangement is finance or operating lease.

b. Assume the lease is a finance lease, prepare journal entries of STU Ltd for the financial year ended 31 December 2019.

c. Prepare the extract of Statement of profit or loss and other comprehensive income and Statement of Financial Position to report the lease for Equipment Ltd for the financial year ended 31 December 2019.

Reference no: EM132535392

Questions Cloud

Explain the spread spectrum technique : Interference is nothing new, but it was managed reasonably with central control. Explain the spread spectrum technique and basic idea behind it.
The american political culture distinctiveness : The American political culture's distinctiveness owes to the special circumstances that gave rise to the nation's core values-the wilderness society
What is the firms level of inventories : The company's current ratio is 2.0, and its quick ratio is 1.3. What is the firm's level of current liabilities? What is the firm's level of inventories
Recent outbreaks of respiratory infection : Recent outbreaks of respiratory infection-based pandemic diseases such as COVID19 and H1N1 have boosted the demand for N95 respirators among frontline
Prepare journal entries of STU Ltd for the financial year : Assume the lease is a finance lease, prepare journal entries of STU Ltd for the financial year ended 31 December 2019
Discuss the current trends in the global IT arena : Demonstrate the ability to perform analyses related to trade policy, standards, domestic and international regulatory policy, and the impacts of changes
Tsunami warning system in mitigating disasters : How effective is a tsunami warning system in mitigating disasters? In answering this question, you may write about a particular tsunami,
Prepare appropriate journal entry to record income tax : Prepare the appropriate journal entry to record Bellinzona's income tax expense in 2021. Use positive numbers for debits and brackets (XXX) for credits
National industrial security program : Elaborate on at least two key components of the National Industrial Security Program Operating Manual that impacts Personal Security.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Is judy right about eliminating the huron division prepare

on january 2 2013 benson hospital purchased a 105164 special radiology scanner from picard inc. the scanner had a

  Swindall industries uses straight-line depreciation on all

swindall industries uses straight-line depreciation on all of its depreciable assets. the company records annual

  Income before income taxes

Assume that the adjusting entry for $2,890 million of accrued expenses was not recorded at the end of the current period. What would have been the income (loss) before income taxes? Enter your answer as a positive amount, even if it is a loss.

  Discuss budgeting considerations

Discuss budgeting considerations. Discuss management decisions related to budgeting. Identify significant costs in your organization

  Evaluate the top-three concepts covered

Evaluate the top-three concepts covered in this course that provided the most value to you and how you might incorporate those concepts

  Find the transaction impact the accounting equation

Suppose your company sold $25,000 in merchandise to a customer for cash. How does this transaction impact the accounting equation?

  What is the overall tax rate on crocket pre tax income

Jimmy's marginal ordinary tax rate it 34% and his marginal tax rate on dividends is 15%. What is the overall tax rate on Crocket and Company's pre tax income

  Cost of debt using both methods currently

Cost of debt using both methods Currently, Warren Industries can sell 15-year,$1,000-par-value bonds paying annual interest at a 12% coupon rate.

  Average manufacturing cost per unit

a. What is the average manufacturing cost per unit? b. What is the amount of ending finished goods inventory? c. What is the amount of gross margin?

  What the dollar balances in Allowance for Doubtful Accounts

A Company uses aging to estimate uncollectibles. After the adjusting entry is made, what will be the dollar balances in the Allowance for Doubtful Accounts

  What cash amount is collected from customers in the period

Net sales in period are $590,000, beginning accounts receivable are $120,000. What cash amount is collected from customers in the period

  Prepare journal entries to record the events

On January 1, Kirkland Company issued $300,000, 8%, 10-year bonds at face value. Interest is payable annually on January 1.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd