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ACCTN202-25A (HAM) - Intermediate Financial Accounting
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Dividends paid to debt like preference are:
Equity like preference shares
I.
II.
III. participate in the profits of an entity
IV.
On 1 April 2021, Giant Finance Limited issued $2,000,000 six year debentures that pay interest every six months at a coupon rate of 8 per cent. At the same time of issuing the debentures, the market required a rate of return of 6 per cent. Any discount or premium on issue is amortised using the effective interest method. The total issue price of the debentures is:
For a liability to exist in the books of an entity, the criteria must be satisfied are:
the
entity has an obligation to transfer an economic resource
the entity
has a present obligation as a result of past events
the entity
has a present obligation as a result of future events
the
entity has a right to receive an economic resource
Equity like preference shares are classified in the balance sheet as:
Debt like preference shares are classified in the Balance Sheet as:
Which one of the following statements is incorrect:
Big Limited entered into a non-cancellable, seven-year lease agreement with Small Limited on 1 January 2020. The lease was for a factory equipment that is expected to have an economic life of eight years, after which time it will have no salvage value. There is a bargain option, which Small Limited will be able to exercise at the end of the seventh year, for $140,000. Big Limited manufactured the equipment at a cost of $3,200,000. There are to be seven annual instalments of $1,300,000 per annum to be paid at the end of each year. Included in the annual lease payment is an amount of $20,000 per annum representing payment to Big Limited for the insurance and maintenance of the equipment. The equipment is to be depreciated using straight-line method. The rate of interest implicit in the lease is 15 per cent. The journal entries in the books of Small Limited to record the lease transaction on 1st January 2020 are
Which of the following statements is/are true in relation to a finance lease:
I. A lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset.
II. Accounting for finance lease follows the principle of “substance over form”.
III. the lessee has the option to purchase the underlying asset at a price that is expected to be sufficiently lower than the fair value
IV. at the inception date, the present value of the lease payments amounts to at least substantially all of the fair value of the underlying asset.
Big Limited entered into a non-cancellable, seven-year lease agreement with Small Limited on 1 January 2020. The lease was for a factory equipment that is expected to have an economic life of eight years, after which time it will have no salvage value. There is a bargain option, which Small Limited will be able to exercise at the end of the seventh year, for $140,000. Big Limited manufactured the equipment at a cost of $3,200,000. There are to be seven annual instalments of $1,300,000 per annum to be paid at the end of each year. Included in the annual lease payment is an amount of $20,000 per annum representing payment to Big Limited for the insurance and maintenance of the equipment. The equipment is to be depreciated using straight-line method. The rate of interest implicit in the lease is 15 per cent. The journal entries in the books of Big Limited to record the annual lease payments received as at 31 December 2020 are: