Question
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.
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