On 30 June 2020, Cambridge Ltd leased a vehicle to Awamutu Ltd. Cambridge Ltd had purchased the vehicle on that day for its fair value of $89,721. The lease agreement, which cost Cambridge Ltd $1,457 to have drawn up, contained the following provisions: Lease Term 4 years Annual payment, payable in advance on 30 June each year $23,900 Economic life of vehicle 6 years Estimated residual value at end of economic life 52,000 Estimated residual value at end of lease term $15,000 Residual value guaranteed by lessee $15,000 Interest rate implicit in the lease 7% The lease is cancellable, but cancellation will incur a monetary penalty equivalent to 2 years rental payments. Included in the annual payment is an amount of $1900 to cover reimbursement for the costs of insurance and maintenance paid by the lessor. The directors of Awamutu Ltd have indicated that they are interested in acquiring the asset at the end of the lease. a) Prepare the following for the lessor, Cambridge Ltd: 1. the lease receipts schedule (show all workings) 2. the journal entries for the year ended 30 June 2020 and 30 June 2021
On 30 June 2020, Cambridge Ltd leased a vehicle to Awamutu Ltd. Cambridge Ltd had purchased the
vehicle on that day for its fair value of $89,721. The lease agreement, which cost Cambridge Ltd $1,457 to
have drawn up, contained the following provisions:
Lease Term 4 years
Annual payment, payable in advance on 30 June each year $23,900
Economic life of vehicle 6 years
Estimated residual value at end of economic life 52,000
Estimated residual value at end of lease term $15,000
Residual value guaranteed by lessee $15,000
Interest rate implicit in the lease 7%
The lease is cancellable, but cancellation will incur a monetary penalty equivalent to 2 years rental
payments. Included in the annual payment is an amount of $1900 to cover reimbursement for the costs
of insurance and maintenance paid by the lessor. The directors of Awamutu Ltd have indicated that they
are interested in acquiring the asset at the end of the lease.
a) Prepare the following for the lessor, Cambridge Ltd:
1. the lease receipts schedule (show all workings)
2. the
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