Prepare the lease payments schedule for cookie ltd using

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Reference no: EM133530892

Case Study: Chef Hut Ltd manufactures commercial grade ovens used in baking. On 1 July 2023, Chef Hut entered into a non-cancellable four year lease agreement with Cookie Ltd. The terms of the lease required Cookie Ltd to make an initial payment of $50,000 upon signing the lease agreement with four annual lease payments of $25,000 to follow with the first being made on 30 June 2024. Included in the four annual lease payments is an amount of $2,000 representing payment to the lessor for the insurance and maintenance of the equipment. The residual value at the end of the lease term is $28,000 and the lessee has guaranteed $10,000. The equipment is expected to have a useful life of five years, after which it will have a residual value of $24,000. Cookie Ltd intends to return the equipment to Chef Hut Ltd at the end of the lease term. The equipment cost Chef Hut Ltd $120,000 to manufacture.

Required:
A. Prepare the lease payments schedule for Cookie Ltd using the interest rate implicit in the lease of 10 %.
B. Prepare the journal entries for Cookie Ltd for the full year from 1 July 2023 to 30 June 2024.

Reference no: EM133530892

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