On 1 July 20X1 Wise Ltd acquired a delivery vehicle at fair value. On the same day, Wise Ltd leased the vehicle to Street Ltd. Wise Ltd determined that the lease was a finance lease.

The details of the lease arrangement are as follows:

• The lease term was 4 years and the interest rate implicit in the arrangement was 4%

• The lessee agreed to pay an amount of $23,000 to the lessor on the 1 July each year, commencing on 1 July 20X1

• The residual value at the end of the lease term was $24,000 and of this, an amount of $16,000 was guaranteed by the lessee

• $4,000 is the amount of the residual value guarantee that was expected to be payable by the lessee to the lessor at the end of the lease term

• The lessee paid initial direct costs of $1,590 and the lessor paid initial direct costs of $1,879 at the commencement of the lease

• The lease arrangement is non-cancellable

• The vehicle will be returned to the lessor at the end of the lease term

Required:

Write in the box below the amount that would be recognised by Street Ltd in accordance with the requirements of AASB 16: Leases as the Right-of-Use Asset for the above lease arrangement. Do not include any spaces or dollar signs in your answer.

Required:

Refer to the previous question about leases and write in the box below the journal entries that would be recognised by Lessee Ltd in accordance with the requirements of AASB 16: Leases for the period 1 July 20X1 to 30 June 20X2.

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Requried:

Refer to the previous question about leases and calculate the fair value of the leased asset at the commencement of the lease. Show all workings to support your answer.

Required:

Refer to the previous questions and briefly explain how the lessor would have determined that the lease was a finance lease in accordance with the requirements of AASB 16: Leases? Support your explanation with examples from the question and appropriate references from the Australian Accounting Standard.