On 1 July 2019 Sherlock Ltd leased a processing plant to Holmes Ltd . The plant was purchased by Sherlock Ltd on 1July 2019 for its fair value of $467,112 .The lease agreement contained the following details: Lease term
On 1 July 2019 Sherlock Ltd leased a processing plant to Holmes Ltd . The plant was purchased by Sherlock Ltd on 1July 2019 for its fair value of $467,112 .The lease agreement contained the following details:
Lease term 3 years
Economic life of plant 5 years
Annual rental payment in arrears commencing 30/6/2020 $150,000
Residual value at end of lease term $90,000
Residual guaranteed by lessee $60,000
Interest rate implicit in lease 7%
The lease is cancellable only with permission of the lessor .
Holmes intends to return the processing plant to the lessor at the end of the lease term .The lease has been classified as a finance lease by both lessee and lessor .
Required:
(a) Prepare the lease payment schedule for the lessee
(b) Prepare the
30 June 2020 and 30 June 2021.
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