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Prepare the journal entries for the lessee on july

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Reference no: EM132953735

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

Problem 1: Calculate the present value of lease payments (show all workings).

Problem 2: Prepare the lease schedules for the lessee (show all workings).

Problem 3: Prepare the journal entries for the lessee on 30 June 2018.

Problem 4: Prepare the journal entries for the lessee on 01 July 2018.

Reference no: EM132953735

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