Question
On 1 July 2022, Monkey Ltd leased a plasticmoulding machine from Wise Ltd. The machine cost Wise Ltd $65000 to manufacture and had a fair
On 1 July 2022, Monkey Ltd leased a plasticmoulding machine from Wise Ltd. The machine cost Wise Ltd $65000 to manufacture and had a fair value of $77055 on 1 July 2022. The lease agreement contained the following provisions.
Lease term | 4 years |
Annual rental payment, in advance on 1 July each year | $20750 |
Residual value at end of the lease term | $7500 |
Residual guaranteed by lessee | Nil |
Interest rate implicit in lease | 8% |
The lease is cancellable only with the permission of the lessor. |
The expected useful life of the machine is 5 years. Monkey Ltd intends to return the machine to Wise Ltd at the end of the lease term. Included in the annual rental payment is an amount of $750 to cover the costs of maintenance and insurance paid for by the lessor.
Required
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Prepare the lease payments schedule for Monkey Ltd (show all workings).
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Prepare the journal entries in the books of Monkey Ltd for the year ended 30 June 2023.
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