Richmond Ltd enters into a non-cancellable contract with Go-Get Ltd to use a truck for a period of three years. The truck is explicitly specified in the contract, and Richmond Ltd decides where the truck will be driven, what cargo will be transported and when the truck will be used. Go-Get Ltd has the right to replace the truck with another truck, which is identical to the first truck, when Go-Get Ltd performs maintenance on the original truck. In addition, Go-Get Ltd has some restrictions in the contract, specifically, that Richmond Ltd cannot haul explosives in the truck. Richmond Ltd pays $55,000 on signing the agreement on 1 July 2022. The truck is expected to have an economic life of six years, after which time it will have an expected salvage value of $50,000. There is a purchase option which Richmond Ltd will be able to exercise at the end of the lease term for $73,000. If this purchase option is exercised the truck will be transferred to Richmond Ltd. There are six half-yearly payments of $120,000, the first being made on 31 December 2022. Included within the $120,000 lease payments is an amount of $42,000 representing payment to Go-Get Ltd for insurance and maintenance of the truck. The truck is to be depreciated on a straight-line basis. The rate of interest implicit in the lease is 12% per annum.

Requirements (rounded to the nearest dollar):

a) In accordance with AASB16 Leases, identify whether the contract between Richmond Ltd and Go-Get Ltd contains a lease. Provide necessary justifications to support your answer. Assuming the above contract contains a lease in accordance with AASB16,

b) Calculate the lease liability and lease asset for Richmond Ltd (show workings);

c) Prepare a full lease schedule for Richmond Ltd, showing the division of the lease rental into interest and principal components; and

d) Provide the journal entries for the lease transactions in the books of Richmond Ltd for the financial year ending 30 June 2023 (from 1 July 2022 to 30 June 2023). Narrations are not required.

* Present value factors