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Prepare the lease receipt schedule for the lessor

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Reference no: EM132605518

On 1 July 2015, Clementi Ltd leased a processing plant to Jurong Ltd. The plant was purchased by Clementi Ltd on 1 July 2015 for its fair value of $895,304. The lease agreement contained the following provisions:

Lease term                                                             $300,000

Economic life of plant                                                  $180,000

Annual rental payment, in arrears (commencing 30/6/2016)        $100,000

Residual value at end of the lease term Residual guaranteed by lessee

Interest rate implicit in lease                                              7%

The lease is cancellable only with the permission of the lessor.

3 years

4 years

The $300,000 annual rental payment include $20,000 to reimburse Clementi Ltd for the maintenance of the plant.

Jurong Ltd intends to return the processing plant to the lessor at the end of the lease term.

Required

Question a) Prepare the lease payment schedule for the lessee (show all workings).

Question b) Write the journal entries in the records of the lessee for the year ending 30 June 2016 ONLY.

Question c) Prepare the lease receipt schedule for the lessor (show all workings).

Question d) Write the journal entries in the records of the lessor for the year ending 30 June

Reference no: EM132605518

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