Reference no: EM133804495

Financial Reporting

Case Study

WeldBot Ltd is a company that manufactures, retails, and leases robotic welding systems-advanced automated technology used for welding tasks. Each system includes a robotic arm with a welding tool, a control system to manage the robot's movements, and safety features to protect workers. On 1 July 2024, Nexus Ltd signed a lease agreement with WeldBot Ltd for a robotic welding system. The system cost WeldBot Ltd $20,000 to produce. The main terms of the lease are as follows/

Lease term 4 years
Initial payment upon signing of lease on 1 July 2024 $30,000
Annual payments payable on 30 June 2025, 2026, 2027 and 2028. $21,300
Economic life of the robotic welding system 5 years
Residual value at the end of the lease term $3,000
Residual value guaranteed by lessee $1,500

Each of the four annual payments includes $1,100 per year to cover the cost of specialised oils and lubricants provided by WeldBot Ltd to Nexus Ltd over the previous year. WeldBot Ltd also paid $375 in legal fees for preparing the lease agreement>

The lease can only be canceled with the permission of WeldBot Ltd. Nexus Ltd plans to return the robotic welding system at the end of the lease term.

Required:

Prepare the lease receipts schedule for Weldbot Ltd using the interest rate implicit in the lease of ten (10%). Show all workings and round off to the nearest dollar.

Prepare the journal entries for WeldBot Ltd for the full year from 1 July 2024 to 30 June 2025. Show all workings and round off to the nearest dollar. Narrations are required.

Activity - Leases

Strong Ltd entered into a lease for some machinery with Big Ltd on 1 July 2020. The details of the lease agreement were as follows:
The term of the lease is 3 years and commences on 1 July 2020.
An initial lease payment of $100,000 is to be made on 1 July 2020
Two further lease payments of $100,000 annually on 30 June, commencing 30 June 2021.
The residual value at the end of the lease is $50,000 has been guaranteed by the lessee. There is a purchase option that allows the lessee to purchase the machinery at the end of the lease for the guaranteed residual value. However it is expected that Strong Ltd (the lessee) will return the machinery to the lessor (Big Ltd) at the end of the lease (30 June 2023). The lessee expects to pay
$3,000 in relation to the guaranteed residual value as the machinery is expected to realise $47,000 at the end of the lease term.
The economic life of the asset is 4 years.
The residual value at the end of the economic life is $5,000.
The interest rate implicit in the lease is 10%
The fair value of the machinery as at 1 July 2020 is $308,600.
Strong Ltd incurred direct costs of $4,000 in relation to the lease. Costs of $2,500 were incurred by Big Ltd.

Required:

(i) Identify the components of the lease payments under this lease Your Writing Experts Are Ready - Hire Now!

(ii) Calculate the present value of the lease payments.

Calculate the amount of the lease asset and lease liability to be recognised at the beginning of the lease by the lessee. (You need to show all calculations and show the basis for these).

Draw up a schedule for the lease liability for the duration of the lease.

Prepare the journal entries required to account for the finance lease in the accounts of Strong Ltd for the year ending 30 June 2021 (You need to include dates for all journal entries)

Show what amount in relation to this lease would be included in the statement of financial position as at 30 June 2022 as a non-current liability.

Assessment 2

Assessment Description

This group case study is designed to test your ability to apply the knowledge gained from ACCM4300 workshops 4 & 5 to a practical scenario. It will also help you develop writing strategies to present accounting information while working in teams effectively.

You will be required to analyse the information provided and carry out computations in accordance with the requirements of AASB16 and AASB112. Based on your analyses, you will be required to prepare journal entries.

Assessment Instructions

This assessment is conducted in class during week 6 and examines content from workshop weeks 4 & 5.

Prepare thoroughly by studying the workshop notes and additional reading from MyKBS. You can also prepare by practicing the during workshop and after workshop questions and checking your answers for accuracy.

The group case study should be completed in groups, with a maximum of three students per group. Email your lecturer with preferences, if any, for whom you would like to work with in a group by week 5. Your lecturer will consider your preferences and allocate you to a group in the week 6 workshop.

Each case study should be attempted as a group with a time allocation of 60 minutes per case. Students will be required to submit the first case before commencing work on the second case.

Students enrolled in online classes will be assigned to breakout rooms to complete the group case studies. Students must participate and use their video camera in the breakout rooms. The group must share the screen as they work through the question together as a group.
Students enrolled in face-to-face classes are not permitted to access their mobile phones during the workshop.

Please refer to the Assessment Marking Guide to assist you in completing all the assessment criteria.