Reference no: EM133051475
Question - On 30 June 2020 Bill Limited leased a machine (non-current asset) from Kim Limited. The following represents the key terms of the lease agreement.
Lease term 4 years
Annual lease payment (payable in advance on 30 June each year) $41,500
Estimated useful life of the machine 5 years
Estimated residual value at the end of the lease term $8,000
Residual value guaranteed by lessee $5,600
Interest rate implicit in the lease 8%
The annual lease payments include executory costs of $1,500. Kim Limited pays the executory costs on behalf of Bill Limited every year. Bill Limited intends to return the asset to the lessor at end of the lease term. The costs incurred by Kim Limited for the preparation of the lease were $5,000. The lease is classified as a finance lease in accordance with AASB 16 'Leases'.
Required -
(a) Prepare the lease payments schedule for the lessee (show all workings).
(b) Prepare the journal entries in the books of the lessee from 30 June 2020 to 30 June 2021.
(c) Prepare the lease receipt schedule for the lessor (show all workings).
(d) Prepare the journal entries in the books of the lessor from 30 June 2020 to 30 June 2021.
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