Exercise 10.16 Gran Ltd has entered into an agreement to lease a D9 bulldozer to Torino Ltd. The lease agreement details are as follows. Length of lease Commencement date Annual lease payment, payable 30 June each year commencing 30 June 2020 Fair value of the bulldozer at 1 July 2019 Estimated economic life of the bulldozer Estimated residual value of the plant at the end of its economic life Residual value at the end of the lease term, of which 50% is guaranteed by Torino Ltd Interest rate implicit in the lease 5 years 1 July 2019 $6,400 $27,838 8 years $1,600 $5,800 9% The lease is cancellable, but a penalty equal to 50% of the total lease payments is payable on cancellation. Torino Ltd does not intend to buy the bulldozer at the end of the lease term. Gran Ltd incurred $800 to negotiate and execute the lease agreement. Gran Ltd purchased the bulldozer for $27,838 just before the inception of the lease. 1. Your answer is correct. State how both companies should classify the lease. finance lease Both companies should classify the lease as a/an Click if you would like to Show Work for this question: Open Show Work Your answer is correct. Prepare a schedule of lease payments for Torino Ltd. (Round factor values to 4 decimal places, e.g. 5.2752 and final answers to o decimal places, e.g. 5,275. The final interest amount will need to be adjusted to allow the total Liability balance at the end of the lease period to equal 0 (zero).) Torino Ltd (lessee) Lease payments schedule Minimum lease Interest Liability payments expense reduction $ $ $ Liability balance $ 1 July 2019 26779 30 June 2020 6400 2410 3990 22789 30 June 2021 6400 2051 4349 18440 30 June 2022 6400 1660 4740 13700 30 June 2023 6400 1233 5167 8533 30 June 2024 9300 767 8533 0 34900 8121 26779 Click if you would like to Show Work for this question: Open Show Work Your answer is partially correct. Try again. Prepare a schedule of lease receipts for Gran Ltd. (Round factor values to 4 decimal places, e.g. 5.2752 and final answers to o decimal places, e.g. 5,275. The final interest amount will need to be adjusted to allow the total Receivable balance at the end of the lease period to equal 0 (zero).) Gran Ltd (lessor) Lease receipts schedule Minimum lease Interest Receivable receipts revenue reduction $ $ $ Receivable balance $ X 1 July 2019 28664 X X 30 June 2020 6400 2580 3820 24844 x X 30 June 2021 6400 2236 4164 20680 X x x 30 June 2022 6400 1861 4539 16141 X x 30 June 2023 X 6400 1453 4947 11194 X 30 June 2024 12200 1006 11194 X 37800 91361 28664
