Reference no: EM133055421
Question - On 1 July 2021, Marcie Ltd leased a building from Sally Ltd. The following are details of the building and the lease contract:
-The building has a fair value of $187 000.
-Lease term is 5 years, useful life of the building is 6 years, and Marcie Ltd will leave the building at the end of the lease term.
-Lease payments are in arrears and will be paid on 30 June of each year, starting 30 June 2022, with $45,000 as the annual payment. Included in the annual payment is $3,000 to reimburse Sally Ltd for payment on the insurance policy.
-Residual value of the building at the end of the lease term is $15,000, with Marcie Ltd guaranteeing $11,000 of the residual value
-The interest rate implicit in the lease arrangement is 6%In setting up the lease arrangement Marcie Ltd incurred $859, while Sally Ltd incurred $1 130.
Required -
a) Prepare all the necessary journal entries for Marcie Ltd (lessee) for the financial year 1 July 2021 - 30 June 2022.
b) Calculate the balance of the lease receivable on 1 July 2022 for Sally Ltd.
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