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Create all the necessary journal entries for trevor ltd

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Reference no: EM132957103

On 1 July 2020, Trevor Ltd leased equipment from Hannah Ltd. The following are details of the equipment and the lease contract:

  • The equipment has a fair value of $43,000
  • Lease term is 5 years, useful life of the equipment is 6 years, and Trevor Ltd will return the equipment at the end of the lease term
  • Lease payments are in advance and will be paid on 1 July of each year, starting 1 July 2020, with $12,000 as the annual payment
  • Residual value of the equipment at the end of the lease term is $4,000, with Trevor Ltd guaranteeing 75% of the residual value
  • The interest rate implicit in the lease arrangement is 6%

In setting up the lease arrangement Trevor Ltd incurred $1,177, while Hannah Ltd incurred $1,570.

Required:

Problem 1: Make all the necessary journal entries for Trevor Ltd (lessee) for the date 30 June 2021 only. Show all working out.

Reference no: EM132957103

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