Granny Ltd sells apple picking machines for $263,948. The machines have a useful life of 8 years.

AJ Ltd decides to lease a machine from Granny Ltd for a period of 7 years by way of a non-cancellable lease. The lease commenced on 1 July 2011. The lease payments, including reimbursement of Granny Ltds maintenance costs of $5,000 per annum, are made at the end of each year and amount to $55,000. There is an unguaranteed residual at the end of the lease term of $40,000.

According to the requirements of AASB 16:

a)Confirm the interest rate implicit in the lease is 10% and show your calculations.

b)Prepare the lease payment schedule for the life of the lease.

c)Record entries in general journal form to record the lease transactions at 1 July 2011 and at 30 June 2012 for AJ Ltd

d)Show what would be reported in the statement of financial position for AJ Ltd at 30 June 2012.