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Prepare a schedule of lease payments for boral ltd

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Reference no: EM132993591

On 1 July 2019, Pretzel Ltd leased an item of machinery to Boral Ltd for 3 years. Boral Ltd incurred legal costs and taxes of $1,200 when entering the lease contract.

  • The lease contract requires Boral Ltd to make 3 annual lease payments of $12,400 commencing on 30 June 2020.
  • The lease contract also includes a bargain purchase option, which Boral Ltd expects to exercise, to purchase the equipment for $3,700 at the end of the lease term. The equipment has an estimated economic life of 6 years, after which it will have zero residual value.

The lessee's incremental borrowing rate is 3% per annum. The relevant present values are:

Number of periods to Maturity 3
Interest Rate 3%
Present Value of $1 due at Maturity 0.9151
Present Value of an annuity of $1 until Maturity 2.8286

Required:

Problem 1: Calculate the amount of the lease liability and right of use asset at 1 July 2019 for Boral Ltd, in accordance with AASB16: Leases.

Problem 2: Prepare a schedule of lease payments for Boral Ltd for the financial years ending 30 June 2020 and 30 June 2021, showing lease payments, interest expense, principal reduction, and outstanding lease liability

Reference no: EM132993591

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