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Question: on 1 july 2017 western mining ltd leased a large...

Question details

On 1 July 2017, Western Mining Ltd leased a large truck from Todd Ltd. The truck had a fair value of $150,109 on 1 July 2017. The lease agreement contained the following provisions:

 

  • Lease term 4 years
  • Annual lease payment in advance on 1 July each year $45,000. 
  • Expected residual value at the end of the lease term $15,000.
  • There is no residual value guaranteed by Western Mining Ltd.
  • Interest rate implicit in lease 8%.
  • The lease is non-cancellable.
  • The expected economic life of the machine is 5 years. 
  • Western Mining 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.
  •  Included in the payment an amount $5,000 for the insurance of truck

 

Required

 

  1. Calculate the present value of lease payments (show all workings). 
  2. Prepare the lease schedule for the lessee. 
  3. Prepare the journal entries for the lessee on 1 July 2017. 
  4. Prepare the journal entries for the lessee on 30 June 2018. 
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