Katy Corp. purchased an item of equipment on 1 July 2020 and leased this equipment...
50.1K
Verified Solution
Link Copied!
Question
Accounting
Katy Corp. purchased an item of equipment on 1 July 2020 and leased this equipment to Perry Ltd on the same day. The equipment is to be depreciated on a straight-line basis. The financial year-end date is 30 June. The following information is available:
Lease term: 5 years
Lease payments: the annual lease payment is $30,000. The first annual lease payment is payable on 1 July 2020. The subsequent four annual lease payments are due on 30 June.
Useful life of the equipment: 6 years
Interest rate implicit in the lease: 10%
The residual value at the end of the lease term is expected to be $8,000, of which Perry Ltd guaranteed is $6,500.
Katy Corp. classifies the lease as a finance lease.
What is the present value of guaranteed residual value?
What is the balance of Lease Liability that Perry Ltd should record on its balance sheet at the inception date of the lease?
What is the balance of Lease Receivable that Katy Ltd should record on its balance sheet at the inception date of the lease?
What is the depreciation expense that Katy Ltd should record for the financial year ended on 30 June 2021?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
