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Provide journal entries for sydney ltd for the year ended

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Reference no: EM132573538

On 1 July 2020, Newcastle Ltd entered into an agreement on to lease a processing plant with a fair value of $569,230 to Sydney Ltd. The terms of the lease agreement were:

Lease term                                                                        3 years

Annual rental payment, in arrears                                         $225,000

The total residual value of the plant at the end of lease term          $50,000

Residual value guarantee by Sydney (lessee) Ltd                            $20,000

The economic life of this plant is four years. Annual rental payment commences on 30 June 2021. At the end of the lease term, the plant is to be returned to Newcastle Ltd. In setting up the lease agreement, Newcastle Ltd incurred $7,350 in legal fees and stamp duty costs. The annual rental payment includes $25,000 to reimburse Newcastle Ltd for maintenance costs incurred on behalf of Sydney Ltd. The lease is cancellable, but only with the permission of the lessor. Interest rate implicit in the lease 6%. Newcastle Ltd (lessor) treats this lease as a finance lease.

REQUIRED

Question a) Provide journal entries for Sydney Ltd for the year ended 30 June 2021 in accordance with AASB 16 Leases. Exclude journal narrations.

Question b) Prepare journal entries in the records of Newcastle Ltd for the year ending 30 June 2021 in accordance with AASB 16 Leases. Exclude journal narrations.

Reference no: EM132573538

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