On 1 July 2016, Christchurch Ltd leased a processing plant to Wellington Ltd. The plant was purchased by Christchurch Ltd on 1 July 2016 for its fair value of $467 112. The lease agreement contained the following provisions:

Lease term 3 years

Economic life of the plant 5 years

Annual rental payment, in arrears $150 000

Residual value at the end of the lease term $90 000

Residual guaranteed by the lessee $60 000

Interest rate implicit in the lease 11%

The lease is cancellable only with the permission of the lessor

Welling Ltd intends to purchase the processing plant at the end of the lease term for $50 000. The lease has been classified as a finance lease.

REQUIRED:

1. Prepare the journal entries to account for the contract over the lease term (Hint:First prepare the lease payments schedule). Narrations are required.

LEASE PAYMENTS SCHEDULE		11%
Year	Lease liability b/f	Lease payment	Interest	Decrease in lease liability	Lease liability c/f

Journals:

DETAILS	DEBIT	CREDIT

If you could show me the working that would be wonderfull!