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Prepare the journal entries to be posted in books

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Reference no: EM132620892

Sun limited (lessee), a calendar year firm agreed to lease an equipment on 1s January 2016 under following terms from Moon limited, also a calendar year firm. Moon limited is in an intermediary

Semiannual lease payment in arears Ksh 150,000

Lease term 4 years Asset life 10 years

Fair value of asset at inception of lease Ksh 1,000,000

Fair value of asset at the end of lease term Ksh 400,000

Bargain purchase option offered at end of lease term Ksh 200,000

Lease implicit interest rate is 12%

Required.

Problem 1: Prepare the journal entries to be posted in books of both lessee and lessor in the first year of lease and present extract of the financial statements of the two.

Reference no: EM132620892

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