Prepare the journal entries in the books of wise ltd

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Question - On 1 July 2022, Monkey Ltd leased a plastic-moulding machine from Wise Ltd. The machine cost Wise Ltd $65 000 to manufacture and had a fair value of $77 055 on 1 July 2022. The lease agreement contained the following provisions. Lease term 4 years Annual rental payment, in advance on 1 July each year $20 750 Residual value at end of the lease term $7 500 Residual guaranteed by lessee nil Interest rate implicit in lease 8% The lease is cancellable only with the permission of the lessor. The expected useful life of the machine is 5 years. Monkey Ltd intends to return the machine to the Wise Ltd at the end of the lease term. Included in the annual rental payment is an amount of $750 to cover the costs of maintenance and insurance paid for by the lessor.

Required -

1. Prepare the lease payments schedule for the Wise Ltd (show all workings).

2. Prepare the journal entries in the books of Wise Ltd for the year ended 30 June 2023.

Reference no: EM132995185

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