Reference no: EM133024797
Question - Indiana Ltd decided to lease from Jones Ltd a motor vehicle that had a fair value at 30 June 2018 of $38,960. The lease agreement contained the following provisions:
Lease term (non-cancellable) 3 years
Annual rental payments (commencing 30/6/18) $11,200
Guaranteed residual value $12,000
Expected residual value $12,000
Interest rate implicit in the lease 5%
The expected useful life of the vehicle is 5 years. At the end of the 3-year lease term, the car was returned to the lessor. The annual rental payments include an amount of $1,200 to cover the cost of maintenance and insurance arranged and paid for by the lessor.
Both companies apply AASB 16 "Leases" for the accounting treatment of lease transactions.
Required -
-Calculate the present value of lease payments (show all workings).
-Prepare the lease schedules for the lessee (show all workings).
-Prepare the journal entries for the lessee on 30 June 2018.
-Prepare the journal entries for the lessee on 01 July 2018.
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