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Quiz 2 Solution

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Lahoty Arpit Arunkumar
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43 views4 pages

Quiz 2 Solution

quizz

Uploaded by

Lahoty Arpit Arunkumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Considering Unguaranteed Residual Value

Lessee Lessor

Equipment Account Dr. 3,888,700 Net investment in lease Dr. 3,934,260


To Lease obligation Cr. 3,888,700 Cost of equipment sale Dr. 3,554,440
Inventory of equipment Cr. 3,600,000
Sale of computer equipment Cr. 3,888,700

6th Year
Instalment
Lease obligation Dr. 877,193 Cash Dr. 1,000,000
Interest Expenses Dr. 122,807 Interest Income Cr. 135,088
Cash Cr. 1,000,000 Net investment in lease Dr. 864,912

Depreciation
Depreciation Exp. Dr. 648,117 No entry
Acc. Depreciation Cr. 648,117

Return of asset
No entry Inventory of equipment Dr. 100,000
Net investment in lease Cr. 100,000

Considering Guaranteed Residual Value


Lessee Lessor

Equipment Account Dr. 3,934,260 Net investment in lease Dr. 3,934,260


To Lease obligation Cr. 3,934,260 Sale of computer equipment Cr. 3,934,260

Cost of equipment sale Dr. 3,600,000


Inventory of equipment Cr. 3,600,000
6th Year
Instalment
Lease obligation Dr. 877,193 Cash Dr. 1,000,000
Interest Expenses Dr. 122,807 Interest Income Cr. 122,807
Cash Cr. 1,000,000 Net investment in lease Dr. 877,193

Depreciation
Depreciation Exp. Dr. 639,043 No entry
Acc. Depreciation Cr. 639,043

Return of asset
Lease obligation Dr. 100,000 Inventory of equipment Dr. 100,000
Equipment Account Cr. 100,000 Net investment in lease Cr. 100,000
3888700
Year Principal 1 Interest
1 3433118 544418
2 2913755 480636.5
3 2321680 407925.6
4 1646715 325035.2
5 877255.53 230540.2
6 71.3003 122815.8
877184.23

3,934,260
Year Principal 1 Interest
1 3485056.4 550796.4
2 2972964 487907.9
3 2389179 416215
4 1723664 334485.1
5 964977.41 241313
6 100074.25 135096.8
864903.16
Assumption Unguaranteed Residual Value as the property would be returned

At time t=0, before lease is signed


Lessor
Inventory of asset 111270

After year 0, after lease is signed


Lessor
Asset
Net investment in lease 135005
Inventory of Asset 0

Income Statement
Sale of equipment 124328
Cost of equipment 100593
Profit 23735 Profit Booked

After year 1
Lessor
Asset
Net investment in lease 135005 Starting Starting
Net investment in lease 99441.6 Ending Ending

Income Statement
Interest Income 16200.6

Payment 51764
Lease Paid Back 35563.4

On cancellation of lease

Starting

Ending
Step 1- payback the deb

Income Statement
Lessee

Lessee
Asset Liability
Equipment Account 124328 Lease obligation 124328

Lessee
Asset Liability
Equipment Account 124328 Lease obligation 124328
Equipment Account 82885 Lease obligation 87483.36

Income Statement
Interest Expense 14919.36
Depreciation 41442.67

Payment 51764
Interest component 14919.36
Principal paid back 36844.64

Lessee
Asset Liability
Equipment Account 82885 Lease obligation 87483.36

Asset Liability
Equipment Account 0 Lease obligation 0

Profit on return of lease 4598


Penalty -5000.00
Net Profit -401.97

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