Question

Question 24

Whiterun Ltd leases a boat to Riverwood Ltd. The lease has the following terms: The lease is for a three year period, commencing 1 July 2020. The lease payments are to be made in advance, with the first payment on 1 July 2020. Each lease payment is to be for $20 000. The expected residual value of the boat is $5 000. Riverwood Ltd guarantees $4 000 of the residual value. The interest rate implicit in the lease is 5%. Assuming that Whiterun Ltd does not incur any initial direct costs and that the lease is a finance lease, what is the amount of the lease receivable which they should recognise at the start of the lease?

		$57 188
		$58 784
		$60 644
		$61 507

Question 25

Commander Ltd leased a ship to Shepard Ltd. The ship was leased for a term of ten years. On the day before the lease commencing, Commander Ltd had bought the ship for $10 000 000. The legal fees incurred by Commander Ltd to draw up the lease agreement amounted to $500 000. Assuming that the lease is a finance lease, what is the amount of the lease receivable that Commander Ltd should recognise at the start of the lease?

		$10 000 000
		$9 500 000
		$10 500 000
		There has not been enough information provided to accurately determine this

30

Gordon Ltd leases a mining helicopter from Freeman Ltd. The right to use asset recorded by Gordon Ltd is valued at $329 133. The lease payment is $100,000 for three years. Lease payments are to be made annually and in advance. Gordon Ltd guarantees the $50 000 residual value of the helicopter. Both Gordon Ltd and Freeman Ltd have the same interest rate implicit in the lease as 5%. What is the amount of Gordon Ltd's annual depreciation expense?

		$93 044
		$76 378
		$109 711
		$143 044

31

Gordon Ltd leases a mining helicopter from Freeman Ltd. The right to use asset is valued at $329 133. The lease payment is $100,000 for three years. Gordon Ltd guarantees the estimated residual value of the helicopter in full. Both Gordon Ltd and Freeman Ltd have the same interest rate implicit in the lease as 5%. What amount would Freeman Ltd use to record the lease receivable in their books?

		$329 133
		$229 133
		$429 133
		$300 000

Answer 1

Question -24	Date	Lease Payment	PV factor @5%	Present value
	01-01-2020	20,000	1	20,000
	01-01-2021	20,000	0.95238	19,048
	01-01-2022	20,000	0.90703	18,141
	31-12-2022	4,000	0.86384	3,455
	Total	64,000		60,644
	Correct answer is option 3 (i.e. $ 60,644 )
Question -25	Lease Receivable should be $ 10,500,000 ( 10,000,000 + 500,000 ), because we must capitalized the legal fee for drafting the lease & amortize it over the lease period.
	Correct answer is option 3 (i.e. $ 10,500,000 )
Question -30	Annual Depreciation will be   $ 109,711           ( 329,133 / 3 )
	Correct answer is option 3 (i.e. $ 109,711 )
Question -31	Freeman Ltd should record lease receivable at $ 329,133 as lessor will record the lease receivable with the present value of Lease payments plus residual value guaranteed as well as unguaranteed . In above case, residual value is guaranteed in full, therefore there will not be any unguaranteed residual value
	Correct answer is option 1 (i.e. $ 329,133 )