Record the journal entries in the book of Y Ltd

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Question - On January 1, 2014, X Ltd. signed a 4 years non-cancellable contract to lease a computer from Y Ltd. requiring equal rental payments of $26,720 at the beginning of each year. The economic life of the asset is 5 years and at the end of the lease period there will be a bargain purchase option for the lessee. The cost and fair value of the computer was $90,000 & $100,000 respectively and the amount of the unguaranteed residual value is $10,000. X Ltd. has an incremental borrowing rate of 12% but has no knowledge that Y Ltd. used a rate 10% in setting annual rentals. Collection of the rentals is reasonably predictable and there are no important uncertainties regarding future un-reimbursable costs to be incurred by the lessor. At the end of the lease term the computer was purchased by the lessee at a price of Tk. 15,000. PVIFAD (10%,4) - 3.48685; PVIF (10%,4) - 0.68301; PVIFAD (12%,4) - 3.40183; PVIF (12%,4) - 0.63552

Instructions - Record the journal entries in the book of Y Ltd.

Reference no: EM132654427

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