'X' Ltd has entered into an agreement to lease a truck to 'Y' Ltd. The lease agreement details are as follows:

Commencement date

1 July 2019

Annual lease payment, payable 30 June each year commencing 30 June 2020

$24,000

Fair value of the truck at 1 July 2019

$97,552

Estimated economic life of the truck

8 years

Estimated residual value of the truck at the end of its economic life

$4,000

Residual value at the end of the lease term, of which 50% is guaranteed by 'Y' Ltd

$12,000

Length of lease

5 years

Interest rate implicit in the lease

9%

The lease is cancellable, but a penalty equal to 50% of the total lease payments is payable on cancellation. 'Y' Ltd does not intend to buy the truck at the end of the lease term. 'X' Ltd incurred $3,600 to negotiate and execute the lease agreement. 'X' Ltd purchased the truck for $97,552 just before the inception of the lease.

Note: PVIFA 9% 5 years = 3.8897; PVIF 9% 5 years =0.6499

Required:

(a)Prepare schedule of lease payments for 'Y' Ltd.

(b)Prepare journal entries to record the lease transactions for the year ended 30 June 2020 in the records of 'Y' Ltd.

(c)State how lessor should classify the lease. Give reasons for your answer.

(d)Prepare schedule of lease receipts for 'X' Ltd.

(e)Prepare journal entries to record the lease transactions for the year ended 30 June 2020 in the records of 'X' Ltd.