Problem
XYZ Co. has decided to lease a Roles Royce Dawn 2022 convertible. Market value is $360,000, leased at $4,000, per month, from ABC C0.; $2,500 represents interest paid. XYZ would like to bring this crown jewel to the PG show and shine every year, for the entirety of this asset's life, in order to promote its auto body shop. The present value of expected lease payments is $320,000. Oil, gas, and consumables are roughly $300 per month paid by the lessee.
A. Show how to determine reporting needs for XYZ (which uses ASPE).
B. Show the lessor's journal entry at the inception of the lease.
C. Show the lessee's journal entry upon month end when payment is made.
D. Show depreciation (indicate Company recording) with useful life estimated at 20 years.
E. How would recording this transaction change if IFRS is used?
F. How are consumables recorded?
G. If XYZ intended to lease just for a month, would recording change?
H. Discuss (G) above if we were to use IFRS.