On 1 July 2021, Croydon Ltd leased ten excavators for five years from Machines 4U Ltd. The excavators are expected to have an economic life of 6 years, after which time they will have an expected combined residual value of $30,000. Net initial directly attributable cost incurred by Croydon Ltd were $10,000. There is a bargain purchase option that Croydon will be able to exercise at the end of the fifth year to acquire all ten excavators for $40,000. It is expected that Croydon will exercise this option. The implicit interest rate in the lease is 12%. There are five annual payments of $45,000, the first being made on 30 June 2022. The machine is to be depreciated on a straight-line basis. Required (Show any necessary calculations and round your answers to the nearest whole dollar): 0 Prepare all relevant journal entries for Croydon Ltd in relation to the lease transaction for the year ended 30 June 2022 (first year of lease). (4 marks) (1) Prepare the balance sheet relating to the leased asset and lease liability for the year ended 30 June 2023. Ignore the impact on Cash.(2 marks) Sunlight Ltd Balance Sheet as at 30 June 2023 (Extract) Current Assets $ Non-current Assets Current Liabilities Non-current Liabilities Parkville Ltd (customer) enters into a 10-year contract with Clayton Ltd (supplier) for the right to use a specified amount of capacity within a cable connecting Brisbane to Melbourne. The specified amount of capacity is equivalent to one third of the full capacity within the cable. Data transmission follows a pre-determined schedule. The supplier determines which fibres are used to transmit the data. The supplier is also responsible for repair and maintenance of the cable. Required: Using the framework provided by AASB 16 Leases, explain why the above contract should or should not be treated as a lease contract. (4 marks) Enter your answer here On 1 July 2021, Croydon Ltd leased ten excavators for five years from Machines 4U Ltd. The excavators are expected to have an economic life of 6 years, after which time they will have an expected combined residual value of $30,000. Net initial directly attributable cost incurred by Croydon Ltd were $10,000. There is a bargain purchase option that Croydon will be able to exercise at the end of the fifth year to acquire all ten excavators for $40,000. It is expected that Croydon will exercise this option. The implicit interest rate in the lease is 12%. There are five annual payments of $45,000, the first being made on 30 June 2022. The machine is to be depreciated on a straight-line basis. Required (Show any necessary calculations and round your answers to the nearest whole dollar): 0 Prepare all relevant journal entries for Croydon Ltd in relation to the lease transaction for the year ended 30 June 2022 (first year of lease). (4 marks) (1) Prepare the balance sheet relating to the leased asset and lease liability for the year ended 30 June 2023. Ignore the impact on Cash.(2 marks) Sunlight Ltd Balance Sheet as at 30 June 2023 (Extract) Current Assets $ Non-current Assets Current Liabilities Non-current Liabilities Parkville Ltd (customer) enters into a 10-year contract with Clayton Ltd (supplier) for the right to use a specified amount of capacity within a cable connecting Brisbane to Melbourne. The specified amount of capacity is equivalent to one third of the full capacity within the cable. Data transmission follows a pre-determined schedule. The supplier determines which fibres are used to transmit the data. The supplier is also responsible for repair and maintenance of the cable. Required: Using the framework provided by AASB 16 Leases, explain why the above contract should or should not be treated as a lease contract. (4 marks) Enter your answer here
