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Prepare the lease schedule for the lessee

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Reference no: EM132628381

On 1 July 2017, Tedd Ltd leased a large truck from Todd Ltd. The truck had a fair value of $54,000 on 1 July 2017. The lease agreement contained the following provisions:

  1. Lease term 3 years
  2. Annual lease payment in arrears on 30 June each year $20,000.
  3. Expected residual value at the end of the lease term $10,000.
  4. There is $10,000 residual value guaranteed by Tedd Ltd.
  5. Interest rate implicit in lease 10%.
  6. The lease is non-cancellable.
  7. The expected economic life of the machine is 5 years.
  8. Tedd Ltd intends to return the truck at the end of the lease term.
  9. Both companies apply AASB 16 "Leases" for the accounting treatment of lease transactions.

Required

Question 1: Calculate the present value of lease payments (show all workings).

Question 2: Prepare the lease schedule for the lessee.

Question 3: Prepare the journal entries for the lessee on 1 July 2017.

Question 4: Prepare the journal entries for the lessee on 30 June 2018.

Reference no: EM132628381

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