Question: on 1 july 2017 western mining ltd leased a large...
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
- Calculate the present value of lease payments (show all workings).
- Prepare the lease schedule for the lessee.
- Prepare the journal entries for the lessee on 1 July 2017.
- Prepare the journal entries for the lessee on 30 June 2018.