On 1 July 2021, Beagle Ltd (lessee) entered into a contract with Goddard Ltd (lessor) to lease an item of equipment for four years. The equipment has a useful life of 5 years. The terms of the lease contract are as follows:

Four annual payments of $50,000 commencing on 30 June 2022.

Unguaranteed residual value of $10,000.

The interest rate implicit in the lease is 5%.

Beagle Ltd has an option to purchase the equipment at its fair value at the end of the lease term. It is unlikely Beagle Ltd will excise this option as the company has a history of leasing new equipment at the end of each contract with Goddard Ltd.

The fair value of the equipment is $185,527.

Goddard Ltd classifies the lease as a finance lease in accordance with AASB16 Leases.

Required:

Please fill in the blanks. Any present value calculations MUST be done using the present value Tables 1 and 2 from the Issues textbook. Round to nearest whole numbers.

Identify which of the following statements about the lease classification is INCORRECT by entering the letter of the incorrect statement. ______________ (Type in your selected answer: A, B, C or D)

A. The present value of the lease payments is equal to at least a substantial amount of the fair value of the equipment, which is an indicator that the lease has transferred substantially all of the risks and rewards of ownership from Goddard Ltd to Beagle Ltd.

B. There is a purchase option at the end of the four-year lease, which is an indicator that the lease has transferred substantially all of the risks and rewards of ownership from Goddard Ltd to Beagle Ltd.

C. The lease term is for a major part of the economic life of the equipment, which is an indicator that the lease has transferred substantially all of the risks and rewards of ownership from Goddard Ltd to Beagle Ltd.

D. Both statements A & C are correct.

The present value of the lease payments is equal to $ _____________ (please fill in the blank)

What is the opening balance of the lease receivable asset recognised by Goddard Ltd on 1 July 2021? Please fill in the blank $ ______________________