Solution-Prepare a lease schedule for the lessee

Prepare a lease schedule for the lessee

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Reference no: EM131632280

Financial Accounting Question-

On 1 July 2015, Fast Ltd leased a machine from Furious Ltd. The machine had a fair value of $235,000 on 1 July 2015. The lease agreement contained the following provisions:

Non-cancellable lease term - 3 years
Economic life of plant - 5 years
Annual rental payment, in advance (1st payment 1/07/15) - $80,000
Residual value at the end of the lease term - $30,000
Residual value guaranteed by the lessee - $12,000
Interest rate implicit in the lease - 8%

Fast Ltd intends to return the machine to Furious Ltd at the end of the lease term. The following is extracted from present value and annuity factor tables:

Period/number of payments	Present value of $1 at 8%	Present value of an annuity of $1 at 8%
2	0.8673	1.7833
3	0.7938	2.5771

Required:

a) Prepare a lease schedule for the lessee (round to the nearest dollar).

b) Prepare journal entries in the books of the lessee, for 1 July 2015 and 30 June 2016.

Reference no: EM131632280

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Prepare a lease schedule for the lessee

Reference no: EM131632280

Reference no: EM131632280

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