HK CAR leased a vehicle from a vehicle dealer

HK CAR leased a vehicle from a vehicle dealer

HK CAR leased a vehicle from a vehicle dealer Myriam Vans. Myriam Vans acquired the vehicle at acost of 180 000$. The vehicle will be painted with HK CAR’s logo and advertising and the cost ofrepainting the vehicle to make it suitable for another owner 4 years later is estimated to be 40 000$.HK CAR plans to keep the vehicle after the lease but has not made any commitment to the lessor topurchase it. The terms of the lease are :Date of entering the lease : 1/07/15Duration of lease : 4 yearsLife of leased asset : 5 years after which it will have no residual valueLease payment : 100 000$ at the end of each yearInterest rate implicit in the lease : 10%Unguarented residual : 50 000$Fair value of the vehicle at inception of the lease 351 140$Question 1 : demonstrate that the interest rate implicit in the lease is 10%Question 2 : prepare the journal entries to account for the lease transaction in the books of the lessorMyriam Vans at 1/07/15 and 30/06/16.Question 3 : prepare the journal entries to account for the lease transaction in the books of thelessee HK CAR at 1/07/15 and 30/06/16


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