Question

Boss limited entered into an agreement to lease a vehicle from Mort limited that had a fair value of shs 100,000.Mort accepted the agreement on condition that Boss makes five installment of lease payments of shs 25,710.The rentals are paid in arrears and the vehicle depreciates on a straight line basis. Required: a) Determine the how finance charge will be apportioned to each year using sum of digit method. b) Prepare the relevant ledgers in the books of the lessee for all the lease period c) Show an extract of the statement of financial position for each of the year

Answer 1

Explanation:

Boss limited entered into an agreement to lease a vehicle from Mort limited that had a fair value

of shs 100,000.Mort accepted the agreement on condition that Boss makes five installment of

lease payments of shs 25,710.The rentals are paid in arrears and the vehicle depreciates on a

straight line basis.

Required:

a) Determine the how finance charge will be apportioned to each year using sum of digit

method.

b) Prepare the relevant ledgers in the books of the lessee for all the lease period

c) Show an extract of the statement of financial position for each of the year