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Prepare a lease payment schedule for Amaton Ltd

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Question - Amaton Ltd leased a delivery truck from a car dealer, Bongo Ltd. Bongo Ltd has no material initial direct costs. The lease contract commences on 1 July 2021 and the lease term is 4 years. Amaton Ltd does not plan to acquire the delivery truck at the end of the lease because it expects that, by then, it will need an electric truck for delivery. The expected life of the leased delivery truck is 5 years. For lease payments, Amaton Ltd pays $50,000 at the commencement date and then, at the end of each year during the lease term. Thus, the first lease payment, $50,000, is made on 1 July 2021 and the second payment is made on 30 June 2022. The guaranteed residual value is $40,000. The interest rate implicit in the lease is 8 per cent.

Required -

a) Calculate the lease liability and lease asset (right-of-use asset) for the lessee, Amaton Ltd.

b) Prepare a lease payment schedule for Amaton Ltd, showing the division of the lease payment into interest and principal components for the life of the lease.

c) Provide the journal entries for the lease in the books of Amaton Ltd as at 1 July 2021, 30 June 2022.

Reference no: EM133116255

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