In: Accounting
Hala Corp. is a manufacturer of vehicles. On December 31, 2019,
Hala Corp. leases
vehicles to Lana Company under a five-year noncancelable lease
agreement. The following
information about the lease and the vehicles is provided:
1. Equal annual payments that are due on December 31 each year
provide Hala Corp. with
an 8% return on net investment
2. Titles to the trailers pass to Lana at the end of the
lease.
3. The fair value of each vehicles is AED 600,000. The cost of each
trailer to Hala Corp. is AED 500,000.
Each trailer has an expected useful life of eight years.
4. Collectibility of the lease payments is reasonably predictable
and there are no important
uncertainties surrounding the amount of costs yet to be incurred by
Hala Corp.
Required:
ACCOUNTING FOR THE LESSEE
1.The justification of the lease classification (for the lessee)
2. The lease amortization schedule (for the lessee)
3. Recording the entries relating to the lease agreement for the first two years of the lease (for the lessee) (mention dates)
4. The section relating to the lease transactions (in the balance sheet) at the end of the second year (for the lessee)
ACCOUNTING FOR THE LESSOR
1. The justification of the lease classification (for the lessor)
2. The lease amortization schedule (for the lessor)
3. Recording the entries relating to the lease agreement for the first two years of the lease (for the lessor) (mention dates)
4.The section relating to the lease transactions (in the balance sheet) at the end of the second year (for the lessor)