0444 Assignment No 2 Solution 2022-Autumn AIOU-Q 2 Ans-Advance Accounting
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Question no 2
A Car was acquired on leases by Affan from Azan Corporation for four
years on 1st January, 2021 that has fair value of Rs. 15,000. Interest rate implicit in the lease is 12%. Useful life of equipment is 5 years. Annual rentals are payable at the end of each year. The lessee depreciates the asset using the straight-line method. (20)
Required:
i. Compute the annual rentals payable.
ii. Prepare amortization schedule
iii. Prepare the journal entries for the first two years in the books of lessee.
#digilearnerspoint , #aiou, 0444 Assignment No 2 Solution 2022, aiou 0444 assignments solution, autumn 2022, aiou autumn 2022, advance accounting, allama iqbal open university, lessor, lessee, lease contract, seller lessee, buyor-lessor, sale-leaseback, finance lease, operating lease,
Question no 2
A Car was acquired on leases by Affan from Azan Corporation for four
years on 1st January, 2021 that has fair value of Rs. 15,000. Interest rate implicit in the lease is 12%. Useful life of equipment is 5 years. Annual rentals are payable at the end of each year. The lessee depreciates the asset using the straight-line method. (20)
Required:
i. Compute the annual rentals payable.
ii. Prepare amortization schedule
iii. Prepare the journal entries for the first two years in the books of lessee.
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LearningTranscript
00:00bismillahirrahmanirrahim assalamu alaikum dear students and viewers welcome to my
00:04youtube channel TG van de Poij in today's video we are going to try to
00:09solve the question number 2 of assignment number 2 of subject advanced
00:15counting with title or code 0444 and it is related to the b comma b a
00:22examination program of AIOU so let's start reading the question 2 then we
00:29will move to the requirements and finally we will see the solution of this
00:34question a car was acquired on leases by a fund from Aksan Corporation for four
00:42years on 1st January 2021 that has fair value of rupees 15,000 interest rate
00:50implicit in the lease is 12% useful life of the equipment is five
00:57years annual rental are payable at the end of each year
01:12these lease the receipt depreciate the asset using the straight line method
01:19okay so the question is that the a company with title of fund has taken a
01:30or acquired a asset from Aksan Corporation for four years on 1st of
01:37January 2021 and it fair value of rupees 15,000 interest rate implicit in the
01:46lease is 12% and the useful life of that equipment is five years so and the
01:54annual renters are being paid at the end of the year each year so then the
02:01information is given in the question statement is that let's see is charges
02:07are record the depreciation of the asset or equipment by using the method of a
02:12straight line method so here a fund is a lessee and Aksan Corporation is the
02:19lesser so we now will read out the requirement first requirement we
02:26compute the annual rental payables entire rental payables means lessee is a
02:33entity who are responsible to pay the annual rental payables at the end of
02:39each year so it is also to be noted that it is ordinary annuity not an annuity due
02:47prepare monetization schedule from the enter payments perspective prepare the
02:54general interest for the first two years I am going to highlight it here yes for
03:03two years in the book of lessees means a fund entity a card so let's move to the
03:12solution now so first part compute the annual rental payable present value of
03:19discount factor we are going to determine 1 in 2 1 minus 1 in 1.1 2 1
03:27plus it is R so after submission I am going to write it here the net value 1.12
03:35this is means exponential R power minus 4 divided by 0.12 as I already shared
03:44with you that it is ordinary annuity so and the so the payment is going to be
03:50paid rental payment at the end of each year so this factor is 3.0373
03:56annual rent payable is equal to fair value divided by PVDF is equal to
04:0215,000 divided by 3.0373 is equal to 4938.60 and fair value is given as here 15,000
04:15so now I am shifting towards the part number 2 prepare amortization schedule
04:23lease payment amortization for a fund engage a car so here is 01021 rental
04:32payment so interest is increase in interest is 12% and the other is
04:39principal so the meaning is that this rental payment annual rental payment
04:454938.60 is composed of two parts one is one is interest rate and the
04:51other is principal amount so at the beginning their balance is same so in
04:58the same year at the end of the year means on 31st December 2021 we are going
05:07to pay the rental payment to Akshan corporation so 1800 is obtained by
05:14taking my by multiplying 15,000 with 0.12 or 12% then we are going to
05:20subtract this amount from rental payment so we will get the portion of
05:25the principal amount and finally we will subtract this amount from the balance so
05:33we will reach the ending balance of the year 21 so same procedure I have repeated
05:40in every consecutive or successive steps so look at this 4,754
05:49is a total interest and 15,000 is the principal amount of the equipment which
05:56is termed as car now come to the last part of the discussion prepare the
06:01general interest for the first two years in the book lease and 01021
06:07at the time of expansion and the entry is like that lease property to
06:15lease liability 15,000 so and lease liability is equal to 31318.60
06:26and to cash 4938.6 I think it should be not like this it should be like this
06:37because he is going to be 15,000 and plus this amount so it is equal to I am
06:44going to be let me add this one
06:57yes one nine seven five four
07:06just like that and please check the rounding figure by yourself so I am
07:24going to be lease liability I'm going to be put it here I'm going to be 15,000
08:12so this is this is amount that we are going to be have a liability at the
08:20start of the year in my opinion if someone has different opinion please
08:28correct it in the comment section with logical argument in support of your
08:33opinion so lease liability at the end of the year and 3138.60
08:411800 so to cash is equal to 4938.6 then again we are going to be
08:49pass the general entry and get the depreciation which is amount is 3000
08:53commodity depreciation is 3000 and lease property lease liability is equal to
09:01again it is coming from the amortization so amortization is based on the this
09:11amount 15,000 lease property amount so we have written it here 11,861.45
09:20and if you want to add interest expense here and just payable so you can add
09:27here interest payable how much is interest payable one four one four two
09:47three point three seven then there is a need to correct this one number one
09:54eight six one point four eight plus one four two three point three seven so this
10:07is the amount on lease liability one three two eight four point eight five so
10:18at the end of the first second year we are going to make payment 4938.6
10:27which is the commission of two parts interest expense and lease liability so
10:35here is the solution and here is the loss general entry regarding the depreciation
10:40of the cost depreciation expense 3000 and commodity depreciation 3000 so here
10:46the solution is finished I hope you have understand this solution clearly if
10:54you have any doubt or question or query regarding the solution please ask me in
10:58comment section or if you want to add something more from your side to make it
11:04more better so please drop your opinion in the comment section and finally
11:11there is a request please if you found any error or mistake regarding the
11:17calculation please correct it in the comment section for the benefits of all
11:22the viewers thanks for watching stay blessed Assalamualaikum