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On 30 June 2021, Maraboi Ltd leased a vehicle to ToWanblut Ltd.
Maraboi Ltd had purchased the vehicle on that day for its fair value of K89721.
The lease agreement cost Maraboi Ltd K1457 to have drawn up and requires ToWanblut to reimburse Maraboi for annual insurance costs of K1050.
Pass the journal entries in the books of ToWanblut Ltd. and Maraboi Ltd
Answer by Me
1. Due to lease agreement, Maraboi Ltd is lessor and ToWanblut Ltd because vehicle on lease gave by Maraboi Ltd to ToWanblut Ltd.
2. K is Myanmar kyat currency name.
Journal Entries in the Books of Lessee ( ToWanblut Ltd. )
1. For total amount of lease payable.
In the beginning of lease
Vehicle Account Debit K89 721
Lease Payable Account Credit K89 721
At this amount Maraboi Ltd has bought same vehicle and because it has given to lease. Vehicle comes in the business as fixed Asset. So, vehicle account debit with K89 721 in books of ToWanblut Ltd. and
Lease Payable Account will credit because now same amount is of liability of ToWanblut Ltd.
because we have not give the lease life. So, we deem it is 75% lease life and lease as capital lease.
In the end of first year and subsequent years.
For charging depreciation of fixed asset. Rate is not given. So, check income tax list and will apply on it as per your country tax laws.
Depreciation Account Debit.
Vehicle account Credit
For repaying the liability of lease
Lease Payable Account Debit K1457
Bank Account Credit K1457
For paying the vehicle annual insurance reimburse expenses.
Annual insurance reimburse expenses account debit K1050
bank account K1050
Journal Entries in the Books of Lessor ( Maraboi Ltd)
For buying of vehicle
Vehicle account debit K89 721
bank account credit K89 721
For insurance expenses of vehicle
Insurance expenses account debit K1050
bank account credit K1050
1. For total amount of lease receivable as asset for giving his asset vehicle.
In the beginning of lease
Lease receivable Account Debit K89 721
Vehicle Account Credit K89 721
At this amount Maraboi Ltd has bought same vehicle and because it has given to lease. Vehicle goes from the business means fixed Asset has decreased. So, vehicle account credit with K89 721 in books of Maraboi Ltd and
Lease receivable Account will credit because now same amount is of asset of Maraboi Ltd
because we have not give the lease life. So, we deem it is 75% lease life and lease as capital lease.
In the end of first year and subsequent years.
For receiving the amount of lease in installments
Bank Account debit K1457
Lease receivable Account Debit K1457
For receiving the vehicle annual insurance reimburse from lessee.
bank account K1050
Annual insurance reimburse account debit K1050
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