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Prepare the lease payments schedule for scooby ltd

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Reference no: EM133171246

Question - On 1 July 2022, Shaggy Ltd leased a processing plant to Scooby Ltd. The plant was purchased by Shaggy Ltd on 1 July 2022 for its fair value of $353 000. The lease agreement contained the following provisions:

Lease term 3 years

Economic life of plant 5 years

Annual rental payment, in arrears (commencing 30/6/23) $120 000

Residual value at end of the lease term $50 000

Residual guaranteed by lessee $30 000

Interest rate implicit in lease 7%

The processing plant will be depreciated by Scooby Ltd on a straight-line basis. Scooby Ltd intends to return the processing plant to Shaggy Ltd at the end of the lease term. The lease has been classified as a finance lease by Shaggy Ltd.

Initial direct costs for setting up the lease were incurred by both parties: $1 595 for Scooby Ltd and $2731 for Shaggy Ltd.

Required -

1. Prepare the lease payments schedule for Scooby Ltd.

2. Prepare the journal entries in the records of Scooby Ltd on 1 July 2022 and for 30 June 2023.

3. Prepare the lease receipts schedule for Shaggy Ltd.

4. Prepare the journal entries in the records of Shaggy Ltd on 1 July 2022 and for 30 June 2023.

Reference no: EM133171246

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