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Prepare the lease schedule for the lessee

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Reference no: EM133162334

Question - On 1 July 2017, Tedd Lid 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:

Lease term 3 years Annual lease payment in arrears on 30 June each year $20,000.

Expected residual value at the end of the lease term $10,000.

There is $5,000 residual value guaranteed by Tedd Ltd.

Interest rate implicit in lease 11%.

The lease is non-cancellable.

The expected economic life of the machine is 5 years.

Tedd Ltd intends to return the truck at the end of the lease term.

Both companies apply AASB 16 Leases for the accounting treatment of lease transactions.

Required -

a. Calculate the present value of lease payments (show all workings).

b. Prepare the lease schedule for the lessee.

c. Prepare the journal entries for the lessee on 1 July 2017.

d. Prepare the journal entries for the lessee on 30 June 2018.

Reference no: EM133162334

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