Exercise 10.5 Finance lease-lessor el On 1 July 2019, Jane Plum decided she needed a new car. She went to the local car yard, North Ltd, run by Fred Peach. Jane discussed the price of a new Roadster Special with Fred, and they agreed on a price of $37 000. As North Ltd had acquired the vehicle from the manufacturer for $30 000, Fred was pleased with the deal. On learning that Jane wanted to lease the vehicle, Fred agreed to arrange for South Ltd, a local finance company, to set up the lease agreement. North Ltd then sold the car to South Ltd for $37 000, el South Ltd wrote a lease agreement, incurring initial direct costs of $1410 as a result. The lease agreement contained the following provisions: Initial payment on 1 July 2019 Payments on 1 July 2020 and 1 July 2021 Guaranteed residual value at 30 June 2022 Implicit interest rate in the lease $13000 $13000 $10000 6% South Ltd agreed to pay for the insurance and maintenance of the vehicle, the latter to be carried out by North Ltd at regular intervals. The cost of these services is valued at $3000 p.a. The vehicle had an expected useful life of4 years. The expected residual value of the vehicle at 30 June 2022 was $12 000. Costs of maintenance and insurance incurred by South Ltd over the years ended 30 June 2020 to 30 June 2022 were $2810, $3020 and $2750 respectively. At 30 June 2022, Jane retumed the vehicle to South Ltd. Assume that the lease is classified as a finance lease by South Ltd. 1. What is the amount of the lease receivable that the company should record at the inception of the lease? ( mark: 0.2 marks for the correct answer, 0.8 marks for your workings) 2. What journal entry/entries is the accountant required to post on 30 June 2020? (2 marks) 3. Prepare the lease receipts schedule for the company (show all workings).(2 marks) el Exercise 10.5 Finance lease-lessor el On 1 July 2019, Jane Plum decided she needed a new car. She went to the local car yard, North Ltd, run by Fred Peach. Jane discussed the price of a new Roadster Special with Fred, and they agreed on a price of $37 000. As North Ltd had acquired the vehicle from the manufacturer for $30 000, Fred was pleased with the deal. On learning that Jane wanted to lease the vehicle, Fred agreed to arrange for South Ltd, a local finance company, to set up the lease agreement. North Ltd then sold the car to South Ltd for $37 000, el South Ltd wrote a lease agreement, incurring initial direct costs of $1410 as a result. The lease agreement contained the following provisions: Initial payment on 1 July 2019 Payments on 1 July 2020 and 1 July 2021 Guaranteed residual value at 30 June 2022 Implicit interest rate in the lease $13000 $13000 $10000 6% South Ltd agreed to pay for the insurance and maintenance of the vehicle, the latter to be carried out by North Ltd at regular intervals. The cost of these services is valued at $3000 p.a. The vehicle had an expected useful life of4 years. The expected residual value of the vehicle at 30 June 2022 was $12 000. Costs of maintenance and insurance incurred by South Ltd over the years ended 30 June 2020 to 30 June 2022 were $2810, $3020 and $2750 respectively. At 30 June 2022, Jane retumed the vehicle to South Ltd. Assume that the lease is classified as a finance lease by South Ltd. 1. What is the amount of the lease receivable that the company should record at the inception of the lease? ( mark: 0.2 marks for the correct answer, 0.8 marks for your workings) 2. What journal entry/entries is the accountant required to post on 30 June 2020? (2 marks) 3. Prepare the lease receipts schedule for the company (show all workings).(2 marks) el
