Question:

Record the relevant journal entries relating to the leased asset for Yang Motorbikes relating to the years ending 31 March 2011 (including the inception of the lease)

a) Yang Motorbikes entered into a non-cancellable, five-year lease agreement on 1 April 2010. The lease was for a piece of complicated equipment with a related service component, which is expected to have an economic life of twelve years, after which time it will have an expected residual value of $210,000. Ownership is not transferred. There are to be five annual payments of $350,000, the first to be made on 31 March 2011 (i.e. lease payments payable at the end of the year). Included in the $350,000 is $35,000 representing payment for administrative processing. Straight line depreciation is used. The interest rate is 5%. (Assume 31 March year-end) are