Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Could you please advise me on the steps to calculate the following questions On 1 July 2019, Harry Ltd leased a machinery from Potter Ltd.

Could you please advise me on the steps to calculate the following questions

On 1 July 2019, Harry Ltd leased a machinery from Potter Ltd. The finance lease agreement contained the following provisions:

The lease term is for 3 years, starting on

1 July 2019

The lease is non-cancellable

Annual lease payment, payable on 30thJune each year

165,000

The estimated useful life of the machinery

5 years

Estimated residual value of the machinery at end of useful life

$30,000

Interest rate implicit in the lease

6 %

There is a bargain purchase option that Harry Ltd will be able to exercise at the end of the lease term for $60,000. The annual lease payment includes $15,000 representing payment to the lessor for insurance and maintenance of the machinery.

Required:

a)Calculate thepresent value lease liabilityamount as at 1 July 2019.

b)Prepare the journal entries in relation to the lease for the year ending 30 Jun 2020.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Robert Libby, Patricia Libby, Daniel G Short, George Kanaan, Maureen Sterling

6th Canadian edition

73208140, 1259105695, 978-1259105692

More Books

Students also viewed these Accounting questions