Quartz Auto Limited (QAL) is engaged in the business of manufacturing of trucks. Since a number...

Quartz Auto Limited (QAL) is engaged in the business of manufacturing of trucks. Since a
number of the prospective customers do not have adequate funds to purchase the vehicles against
full payment, QAL provides financing facility to its customers. It expects to receive a return at the
rate of 15% per annum on the amount of finance.
On 1 July 2014, QAL sold seven trucks to Emerald Goods Transport Company (EGTC) on lease.
The terms of the lease and related information are as follows:
A. The lease period and the expected useful life of the trucks is 5 years.
B. Lease rentals amount to Rs. 1,879,390 per annum.
C. The cost of each truck is Rs. 900,000
D. The expected residual value of each truck is Rs. 150,000 and company uses straight line
method of depreciation.
Required: 05
I. Determine type of lease (Perform all four tests).
II. Prepare Lease Amortization Schedule.
III. Pass General Journal entries for first year in books of lessor and lessee.
IV. Balance Sheet Extract at December 31, 2016.

Expert Solution

ekkarill92 answered 2 years ago

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