On 1 July 2022, ABC Ltd enters into a four-year lease of a machine. ABC Ltd will pay fixed annual payments of $90 000 for four years with the first payment on 30 June 2023

To enter the lease ABC Ltd incurs direct costs of $12 000 at the commencement of the lease term

There is a bargain purchase price option (that ABC Ltd is willing to exercise) for $30 000 at the end of the lease term

The machine is expected to have a useful life of 10 years and no residual value. Lessees incremental borrowing rate: 10%

Required:

1. Determine the initial measure of the lease liability and right-of-use asset and prepare the related accounting journal entry.

2. Prepare the lease payment schedule.

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