Question: AJ Ltd decides to lease a machine from Granny Ltd for a period of 7 years by way of a non-cancellable lease. The lease commenced

AJ Ltd decides to lease a machine from Granny Ltd for a period of 7 years by way of a non-cancellable lease. The lease commenced on 1 July 2011. The lease payments, including reimbursement of Granny Ltd's maintenance costs of $5,000 per annum, are made at the end of each year and amount to $55,000. There is an unguaranteed residual at the end of the lease term of $40,000.

According to the requirements of AASB 16:

a) Confirm the interest rate implicit in the lease is 10% and show your calculations.

b) Prepare the lease payment schedule for the life of the lease.

c) Record entries in general journal form to record the lease transactions at 1 July 2011 and at 30 June 2012 for AJ Ltd

d) Show what would be reported in the statement of financial position for AJ Ltd at 30 June 2012.

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