DU Journeys enters into an agreement with Traveler plc to lease a

Question
DU Journeys enters into an agreement with Traveler plc to lease a car on December 31, 2021. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal or bargain purchase option. The remaining economic life of the car is 3 years, and it is expected to have no residual value at the end of the lease term. 2. The fair value of the car was £15,000 at commencement of the lease. 3. Annual payments are made on December 31 at the end of each year of the lease, beginning December 31, 2022. The first payment is £5,552.82, with each payment increasing by a constant rate of 5% from the previous payment (i.e., the second payment will be £5,830.46, and the third and final payment will be £6,121.98). 4. DU Journeys’ incremental borrowing rate is 8%. The rate implicit in the lease is unknown. 5. DU Journeys uses straight-line depreciation for all similar cars. a. Prepare DU Journeys’ journal entries for 2021, 2022, and 2023. b. Assume that, instead of a constant rate of increase, the annual lease payments will increase according to a price index. At its current level, the price index stipulates that the first rental payment should be £5,820. What would be the impact on the journal entries made by DU Journeys at commencement of the lease, as well as for subsequent years?

Question

DU Journeys enters into an agreement with Traveler plc to lease a car on December 31, 2021. The following information relates to this agreement. 1. The term of the non-cancelable lease is 3 years with no renewal or bargain purchase option. The remaining economic life of the car is 3 years, and it is expected to have no residual value at the end of the lease term. 2. The fair value of the car was £15,000 at commencement of the lease. 3. Annual payments are made on December 31 at the end of each year of the lease, beginning December 31, 2022. The first payment is £5,552.82, with each payment increasing by a constant rate of 5% from the previous payment (i.e., the second payment will be £5,830.46, and the third and final payment will be £6,121.98). 4. DU Journeys’ incremental borrowing rate is 8%. The rate implicit in the lease is unknown. 5. DU Journeys uses straight-line depreciation for all similar cars. a. Prepare DU Journeys’ journal entries for 2021, 2022, and 2023. b. Assume that, instead of a constant rate of increase, the annual lease payments will increase according to a price index. At its current level, the price index stipulates that the first rental payment should be £5,820. What would be the impact on the journal entries made by DU Journeys at commencement of the lease, as well as for subsequent years?

Continue to order Get a quote

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.