Solution On 1 July 2015, Sandringham Ltd enters a 4 years lease agreement with Brighton Ltd to obtain the right to use equipment. The equipment has a useful life of 6 years. Lease payments of $22,000 are to be made at the end of each financial year for 4 years starting on 30 June 2016. Additional information Implicit interest rate 7% Residual value guaranteed by the lessee: $15,000 Cost to enter the agreement $10,000. REQUIRED Calculate the lease liabiliW and the right-to-use equipment cost. ( 2 mar Lease liability = + = $74,518.40 + 11,443.5 = $85,961.9 Leased asset = lease liabiliW + initial direct costs incurred to enter into the lease a reement = $85,961.9 + $10,000 = $95,961.9 Pv of annui n = 4, k =7% = 3.3872 PV of sin e a ment n= 4k = 7% = 0.7629 payment schedule for 30 June 2016 and 30 June 2017. Lease payment Interest 1 Jul 2015 30 June 2016 30 June 2017 Principal reduction 15,982.67 22,000 22,000 ex ense 6,017.33 4,898.55 Lease liabiliW 85,961.9 69,979 52,878