Journal Entries and Lease Accounting - Math Problem Example

The paper  “Journal Entries and Lease Accounting”  is a cogent example of a finance & accounting math problem.    The cost of the goods is calculated periodically whereby the cost of closing stock per commodity is calculated by averaging the two costs of purchasing. i.e. (600+800)/ To get the new cost per commodity to be sold i.e. $ 700.

Journal entries

               

Date

Description

Folio

DR in $

 

CR in $

           

1-Jul-12

Rent

1

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-Aug-12

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-Sep-12

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-Oct-12

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-Nov-12

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-Dec-12

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-Jan-13

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-Feb-13

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-Mar-13

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-Apr-13

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-May-13

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

       

1-Jun-13

Rent

 

              10,000

     

Bank

     

        10,000

 

for rent payment

                   

 

 

Journal

                 

 

Date

description

Folio

Dr

 

Cr

 

30-Sep-12

Chuck

 

1800

       

Morgan

 

                3,000

       

Bank

     

           4,800

   

For payment of labor work

       

Q2. Journal entry for labor

Q3

 

Journal

                 

 

Date

description

Folio

Dr  $

 

Cr $

 

1-Oct-12

Manufacturing

 

2000

       

Designer

 

              20,000

       

Installation

 

                    500

       

Delivery

 

                    500

       

Creditors

     

        23,000

   

Recording for Invoices received

         

10-Oct-12

Manufacturing

 

1900

       

Designer

 

              20,000

       

Installation

 

                    500

       

Delivery

 

                    500

       

Discount

 

                    100

       

Bank

     

        22,900

   

Manufacturing

     

              100

   

Payment for purchases

       

Q4

 

Journal

                 

 

Date

description

Folio

Dr  $

 

Cr $

 

10-Oct-12

Purchases

 

240,000

       

Bank

     

      240,000

   

For payments of purchases

         

2-Oct-12

Bank

 

           100,000

       

Sales return

 

           100,000

       

Sales

     

      200,000

   

Recording of sales and sales return

         

20-Oct-12

Purchases

 

           300,000

       

Bank

     

      300,000

   

Recording of purchases of goods

         

1-Dec-12

Bank

 

           750,000

       

Sales

     

      750,000

   

Recording of sales of goods to UWS

         

1-Dec-12

Delivery expenses

 

                1,000

       

Cash

     

           1,000

   

To record delivery expenses

       

Q5
Cost of goods sold (COGS) = Opening Stock + Purchases –Closing Stock

Opening stock       0
Add:   Purchases     240,000
Less: closing stock (200000)
 40,0
Opening Stock            200,000
Add:  Purchases           300,000
Less: Closing Stock     175,000
Cogs                            325,000
Total Cogs by year = (325,000 +40,000)

                                 =   365,000

The cost of the goods is calculated periodically whereby the cost of closing stock per commodity is calculated by averaging the two costs of purchasing. i.e. (600+800)/
To get the new cost per commodity to be sold i.e. $ 700.

Q6.
The international accounting standards number 17 gives us a good insight into the types of leases in the market. The IAS 17 gives only two types of leases; these are the finance lease and operating lease. IAS 17 goes ahead and differentiates the two types of leases using the substance over form as the most factor in giving the distinction; Finance lease is when all substance risk is transferred to the lessee at the point of signing out the lease agreement while operating lease is a situation where the substantial risk remains with the owner of the property to be leased out. The control of the car in question remains with the owner through the benefits will go to the company. The risk remains with the owner of the car hence we can conclude that the lease is an operating lease. (Bath, 2006)

The lease is only for 3 years while the car life is 8years, this still qualifies this lease to be an operating lease although the control of the asset is the most crucial aspect in determining the type of the lease.

Q7. Lease calculation
Cost of the car $ 40,407

 The used value of the car is 5000+ (800*3)
 =    29000/3
Monthly payment = 9667 annually
 =   (40407+29000)*10%
 = 6947

Total annual payment = 6947+9667
= 16608. Lease payment annually.

Q8. Straight-line method of depreciation is given by
Dpn = (C-R)/N
Where. Dpn – is the annual depreciation
C - Cost of the Asset
R- Residual Value
N- Expected life of the asset.
Cost of the coach $ 20,000
Residual value   $ 0
Expected life 6 years
Dpn = (20000-0)/6
 = $ 333
Cost of the car $ 40,407
Residual value $ 0
Expected life period 8 years
Dpn =$ (40407-0)/8
= $ 5051

Journal

               

Date

description

Folio

Dr  $

 

Cr $

30-Jul-13

depreciation of couch

 

333

     

Couch

     

        19,667

 

To record depreciation of asset couch

     

30-Jul-13

         

 

depreciation of car

 

                5,051

     

car

     

        35,356

 

 

 

 

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