Repare the fv of mlp, The annual payment included an amount

Repare the fv of mlp

Reference no: EM131079322

On 1 July 2011, Gery mouth Ltd leased a photocopier from Stewart Ltd, a company manufacturing, retails and leases copiers. The photocopier had cost Stewart Ltd $30,000 to make but had a fair value on 1 July 2011 of $35,080. The lease Agreement contained the following provisions:

Lease term	2 years
Annual payment, in advance on 1 July each year	$14,500
Residual value at end of the lease term	$3,000
Residual guaranteed by lessee	Nil
Interest rate implicit in lease	10%
Economic life of the copier	3 years

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

The annual payment included an amount of $2500 p.a. to reimburse Stewart Ltd for the cost of paper and toner supplied to Greymouth Ltd.

1. Classify the lease for both the lessor and lessee. Justify your answer.

2. Prepare the FV of MLP (Minimum lease payment).

3. Prepare, for the Lessee: the lease payment schedule.

Reference no: EM131079322

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