90.2K

Verified Solution

Link Copied!

solve D

On January 1, 2023, Sandhill Inc. enters into a 5-year non-cancellable lease with Wilson Ltd. for equipment that has an estimated useful life of 5 years and a fair value of $1,994,000. Sandhill has an incremental borrowing rate of 8% and Wilson's implicit rate is 6%. Sandhill uses the straight-line depreciation method to depreciate assets. Sandhill will make annual lease payments on January 1 of each year (with the first payment due at the beginning of the lease) based on the fair value of the equipment. The lease agreement includes a guarantee that Sandhill will take over ownership of the equipment from Wilson for a final payment of $106,500. Both companies adhere to IFRS. (a) Calculate the lease payment Wilson Ltd. will charge Sandhill Inc assuming that there is no mark up on the fair value of the equipment. (Round present volue factor calculotions to 4 decimal places, e.s. 12.5124.) Click here to view the factor table. Lease payment $ Prepare the journal entries that Wilson Ltd. would record in the first year assuming that this is a finance lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. List all debit entries before credit entries. (Record journal entries in the order presented in the problem. Round answers to 0 decimal places, eg. 5,275.)

Answer & Explanation Solved by verified expert

See Answer