On 1 July 2022, Shaggy Ltd leased a processing plant to Scooby Ltd. The plant was purchased by Shaggy Ltd on 1 July 2022 for its fair value of $353 000. The lease agreement contained the following provisions: Lease term 3 years Economic life of plant 5 years Annual rental payment, in arrears (commencing 30/6/23) $120 000 Residual value at end of the lease term $50 000 Residual guaranteed by lessee $30 000 Interest rate implicit in lease 7%   The processing plant will be depreciated by Scooby Ltd on a straight-line basis. Scooby Ltd intends to return the processing plant to Shaggy Ltd at the end of the lease term. The lease has been classified as a finance lease by Shaggy Ltd.   Initial direct costs for setting up the lease were incurred by both parties: $1 595 for Scooby Ltd and $2731 for Shaggy Ltd. Required: Prepare the lease payments schedule for Scooby Ltd. Prepare the journal entries in the records of Scooby Ltd on 1 July 2022 and for 30 June 2023. Prepare the lease receipts schedule for Shaggy Ltd.  Prepare the journal entries in the records of Shaggy Ltd on 1 July 2022 and for 30 June 2023.

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.