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Provide schedule of lease payments for mars ltd

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Reference no: EM132668677

Venus Ltd has entered into an agreement to lease a D9 bulldozer to Mars Ltd. The lease agreement details are as follows:

  • Length of lease5 years
  • Commencement date1 July 2010
  • Annual lease payment, payable 30 June each year commencing 30 June 2011, $8 000
  • Fair value of the bulldozer at 1 July 2010$34 797
  • Estimated economic life of the bulldozer8 years
  • Estimated residual value of the plant at the end of its economic life$2 000
  • Residual value at the end of the lease term, of which 50% is guaranteed by Mars Ltd, 7 200
  • Interest rate implicit in the lease9%The lease is cancellable, but a penalty equal to 50% of the total lease payments is payable on cancellation.

Mars Ltd does not intend to buy the bulldozer at the end of the lease term.Venus Ltd incurred $1 000 to negotiate and execute the lease agreement.Venus Ltd purchased the bulldozer for $34 797 just before the inception of the lease.

Required:

Problem A. State how both companies should classify the lease. Give reasons for your answer.

Problem B. Provide schedule of lease payments for Mars Ltd.

Problem C. Provide a schedule of lease receipts for Venus Ltd.

Problem D. Prepare journal entries to record the lease transactions for the year ended 30 June 2011 in the record of both companies.

Reference no: EM132668677

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