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Hopeful Ltd leased a portable sound recording studio from Lessor Ltd. Lessor has no material initial direct costs. Hopeful Ltd does not plan to acquire

image text in transcribed Hopeful Ltd leased a portable sound recording studio from Lessor Ltd. Lessor has no material initial direct costs. Hopeful Ltd does not plan to acquire the portable studio at the end of the lease because it expects that, by then, it will need a larger studio. Page 462 The terms of the lease are as follows: - Date of entering lease: 1 July 2023. - Duration of lease: four years. - Life of leased asset: five years. - Lease payments: $50000 at the beginning of each year. - First lease payment: 1 July 2023. - Lease expires: 1 July 2027. - Interest rate implicit in the lease: 8 per cent. - Guaranteed residual: $40000. (a) Determine the fair value of the portable sound recording studio at 1 July 2023. (b) Prepare a schedule for the lease payments incorporating accrued interest expense. (c) Prepare the journal entries to account for the lease in the books of Hopeful Ltd at 1 July 2023, 30 June 2024 and 1 July 2024. (d) At the termination of the lease, Hopeful Ltd returns the portable sound recording studio to Lessor Ltd, but its fair value at that time is $25 000. What must Hopeful Ltd do to comply with the terms of the lease? Prepare the journal entries in the books of Hopeful Ltd fo

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