On 1 July 2020, Amy Ltd leased a processing plant to Kent Ltd. The plant was purchased by Amy Ltd on 1 July 2020 for its fair value of $512,122. The lease agreement contained the following provisions:

Lease term- 3 Years

The economic life of the plant- 5 Years

Annual rental payment, In arrears (Commencing 30/06/2021)- $200,000

Residual value at the end of the lease term - $100,000

Residual value guaranteed by the lessee -$60,000

The interest rate implicit in the lease - 10%

Annuity factor @ 10% , after the 3 years - 2.4869

Discounting factor of $1, after 3 years- 0.7513

Determine the present value of the lease payments from the perspective of Kent Ltd?

Answer 1

Choose...

$542,458

$512,122

Dr Cash $200,000 Cr Lease liability $145,754 Cr Interest expenses $54,246

Dr Lease liability $145,754 Dr Interest expenses $54,246 Cr Cash $200,000

$299,474

Dr Lease liability $148,788 Dr Interest expenses $51,212 Cr Cash 200,000

Thejournal entry torecordfirst lease payment by Kent Ltd would be: