Thomas Ltd enters into a five-year lease agreement with Hardy Ltd on 1 July 2019 for an item of machinery. Thomas Ltd pays $4,000 to enter the lease contract (direct costs). Hardy Ltd incurs $6,000 of direct costs in arranging the lease. There is a payment of $80,000 to be made in advance each year, with the first being made on 1 July 2020. Included in these payments is $5,000 representing payment to the lessor for insurance and maintenance of the machinery. There is a purchase option that Thomas Ltd will be willing to exercise at the end of the fifth year for $60,000. The machinery is expected to have a useful life of eight years and a residual value of $20,000 at the end of its useful life. The interest rate implicit in the lease is 8%. * NPV Tables are available for reference. Question 2(a) (4 marks) Determine the initial measurement of the lease liability. to 30 B 1 ! Present Value of $1 4% 5% 3% 0.9709 10% 0.9091 11% 0.9009 0.9524 Periods 1 2 3 4 9% 0.9174 0.8417 0.9615 0.9246 0.9426 0.9070 0.8264 0.8116 5 6% 0.9434 0.8900 0.8396 0.7921 0.7473 0.7050 0.6651 0.6274 0.5919 6 0.9151 0.8885 0.8626 0.8375 0.8131 0.7894 0.7664 0.7441 0.7224 0.7014 0.6810 0.8890 0.8548 0.8219 0.7903 0.7599 0.7307 0.7026 0.6756 0.6496 0.6246 0.6006 0.8638 0.8227 0.7835 0.7462 0.7107 0.6768 0.6446 0.6139 0.5847 7 Rate per period 7% 8% 0.9346 0.9259 0.8734 0.8573 0.8163 0.7938 0.7629 0.7350 0.7130 0.6806 0.6663 0.6302 0.6227 0.5835 0.5820 0.5403 0.5439 0.5002 0.5083 0.4632 0.4751 0.4289 0.4440 0.3971 0.4150 0.3677 0.7312 0.6587 0.5935 0.5346 0.4817 0.4339 8 9 0.3909 10 0.5584 11 0.7722 0.7084 0.6499 0.5963 0.5470 0.5019 0.4604 0.4224 0.3875 0.3555 0.3262 0.2992 0.2745 0.2519 0.2311 0.2120 0.1945 0.1784 0.5268 12% 0.8929 0.7972 0.7118 0.6355 0.5674) 0.5066 0.4523 0.4039 0.3606 0.3220 0.2875 0.2567 0.2292 0.2046 0.1827 0.1631 0.1456 0.1300 0.1161 0.1037 0.7513 0.6830 0.6209 0.5645 0.5132 0.4665 0.4241 0.3855 0.3505 0.3186 0.2897 0.2633 0.2394 0.2176 0.1978 0.1799 0.1635 0.3522 0.3173 0.2858 0.2575 12 0.5568 13 0.5303 14 0.6611 0.5775 0.5051 0.3878 0.3405 0.2320 0.5553 0.5339 0.2090 0.1883 0.5134 0.4970 0.4688 0.4423 0.4173 0.3936 0.3714 0.3503 0.3305 0.3118 15 16 17 18 19 20 0.6419 0.6232 0.6050 0.5874 0.5703 0.5537 0.1696 0.4810 0.4581 0.4363 0.4155 0.3957 0.3769 0.3624 0.3387 0.3166 0.2959 0.2765 0.3152 0.2919 0.2703 0.2502 0.2317 0.2145 0.4936 0.4746 0.1528 0.1377 0.1240 0.4564 0.2584 0.1486 Present Value of $1 Annuity 5% 6% 3% 0.9709 9% 0.9174 10% 0.9091 0.9524 0.9434 Periods 1 2 3 1.8334 1.7355 4 5 6 4% 0.9615 1.8861 2.7751 3.6299 4.4518 5.2421 6.0021 6.7327 7.4353 8.1109 8.7605 9.3851 7 8 9 10 1.9135 2.8286 3.7171 4.5797 5.4172 6.2303 7.0197 7.7861 8.5302 9.2526 9.9540 10.6350 11.2961 11.9379 12.5611 13.1661 13.7535 14.3238 14.8775 1.8594 2.7232 3.5460 4.3295 5.0757 5.7864 6.4632 7.1078 7.7217 8.3064 8.8633 9.3936 9.8986 10.3797 10.8378 11.2741 11.6896 12.0853 12.4622 2.6730 3.4651 4.2124 4.9173 5.5824 6.2098 6.8017 7.3601 7.8869 8.3838 8.8527 9.2950 9.7122 10.1059 10.4773 10.8276 11.1581 11.4699 11 Rate per period 7% 8% 0.9346 0.9259 1.8080 1.7833 2.6243 2.5771 3.3872 3.3121 4.1002 3.9927 4.7665 4.6229 5.3893 5.2064 5.9713 5.7466 6.5152 6.2469 7.0236 6.7101 7.4987 7.1390 7.9427 7.5361 8.3577 7.9038 8.7455 8.2442 9.1079 8.5595 9.4466 8.8514 9.7632 9.1216 10.0591 9.3719 10.3356 9.6036 10.5940 9.8181 1.7591 2.5313 3.2397 3.8897 4.4859 5.0330 5.5348 5.9952 6.4177 6.8052 7.1607 7.4869 7.7862 8.0607 8.3126 8.5436 8.7556 8.9501 9.1285 11% 0.9009 1.7125 2.4437 3. 1024 3.6959 4.2305 4.7122 5.1461 5.5370 5.8892 6.2065 6.4924 6.7499 6.9819 7.1909 7.3792 7.5488 7.7016 7.8393 7.9633 2.4869 3.1699 3.7908 4.3553 4.8684 5.3349 5.7590 6.1446 6.4951 6.8137 7.1034 7.3667 7.6061 7.8237 8.0216 8.2014 8.3649 8.5136 12% 0.8929 1.6901 2.4018 3.0373 3.6048 4.1114 4.5638) 4.9676 5.3282 5.6502 5.9377 6.1944 6.4235 6.6282 6.8109 6.9740 7.1196 7.2497 7.3658 7.4694 12 13 14 15 9.9856 10.5631 11.1184 11.6523 12.1657 12.6593 16 17 18 13.1339 19 20 13.5903 Question 2(b) (2 marks) Determine the initial measurement of the right-of-use asset. 1 iii 2. to H BE Question 2(c) (4 marks) Required: Calculate the stream of interest expenses across the lease term. to BEN Question 2(d) (2 marks) Calculate the annual amortisation on the right-of-use asset. ili $ Go Question 2(e) (8 marks) Required: Provide the accounting journal entries for Thomas Ltd for the year ended 30 June 2020. AA