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On 1 July 2019, Hate Ltd leased a processing plant to Love Ltd. The plant was purchased by Hate Ltd on 1 July 2019 for
On 1 July 2019, Hate Ltd leased a processing plant to Love Ltd. The plant was purchased by Hate Ltd on 1 July 2019 for its fair value of $467 112. The lease agreement contained the following provisions: Lease term 3 years Economic life of plant 5 years Annual rental payment in advance (commencing 1/7/2019) $150 000 Residual value at end of the lease term Residual guaranteed by lessee $90 000 Interest rate implicit in lease $60 000 The lease is cancellable only with the permission of the lessor. 7% Love Ltd intends to return the processing plant to the lessor at the end of the lease term. The lease has been classified as a finance lease by both the lessee and the lessor. Required a. Prepare the lease payment schedule for the lessee and lessor. (show all workings) [12 Marks] b. Effective from 1 January 2019, MERS 16 on leases supersedes MERS 117. Determine FOUR (4) differences in terms of recognition and measurement for both MERS. [8 Marks] Total: [20 Marks]
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