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On 1 July 2021, Hudson Ltd leased a photocopier from Torre Ltd, a company that manufactures, retails and leases copiers. The photocopier had cost Torre
On 1 July 2021, Hudson Ltd leased a photocopier from Torre Ltd, a company that manufactures, retails and leases copiers. The photocopier had cost Torre Ltd $30,000 to make but had a fair value on 1 July 2021 of $35,968. The lease agreement contained the following provisions: The lease is non-cancellable. Lease term: 3 years Annual payment, payable in arrears (starting on 30 June 2022): $14,500 Economic life of the copier: 4 years Estimated residual value at the end of the lease term when the copier is returned to Torre Ltd: $3,000 Residual value guaranteed by Hudson Ltd: $1,000 Interest rate implicit in the lease: 4% The annual payment includes an amount of $2,500 per annum to reimburse Torre Ltd for the cost of paper and toner supplied to Hudson Ltd. Prepare the required journal entries in the books of the lessor (Torre Ltd) at 1 July 2021 and 30 June 2022, assuming that the lease meets the criteria for classification as a finance lease. Torre Ltd adjusts its accounts annually on 30 June (the end of its financial year). Notes: Workings are not required to be shown. The amounts recorded in the journal entries should be rounded to the nearest dollar
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