Prepare accounting journal entries for 1 July 2019 & 30 June 2020.
WHL Ltd enters into a non-cancellable 5-year lease agreement with TFL Ltd on 1 June
2019. The lease is for an item of machinery that, at the inception of the lease, has a fair
value of $202,769. The machinery is expected to have an economic life of 7 years. The
contract consists of $50,000 of unguaranteed residual value for the leased asset. There are
to be five annual payments of $62,500, the first being made on 30 May 2020. Included
within the annual lease payment is an amount of $6,250 representing payment to the lessor
for the insurance and maintenance of the machinery. The rate of interest implicit in the
lease is 12%. The lessee intends to take ownership of the underlying asset at the end of the
lease term.
Required: Prepare accounting
Step by step
Solved in 2 steps with 2 images
