Exercise 1

On 1 July 2023, Hot Ltd leased a photocopier from Mail Ltd, a company that manufactures, retails and leases copiers. The photocopier had cost Mail Ltd $30000 to make but had a fair value on1 July 2023 of $35080. The lease agreement contained the following provisions.

Lease term	3 years
Annual payment, payable in advance on 1 July each year	$14,500
Economic life of the copier	4 years
Estimated residual value at the end of the lease term when the copier is returned to Mail Ltd	$3,000
Residual value guarantee by Hot Ltd	$1500
Interest rate implicit in the lease	10%

Required:

1. Prepare the lease payments schedule and the journal entries for the lessee for the year ended 30 June 2026 only.