Reference no: EM132714738
Question - On 1 July 2019, La Ltd leased a plastic-moulding machine from Trobe Ltd. The machine cost Trobe Ltd $130?000 to manufacture and had a fair value of $154?109 on 1 July 2019 The lease agreement contained the following provisions.
Lease term 4 years
An initial payment is paid in advance on 1 July 2019 $40,000
Annual payment of $40,000 to be paid on 30 June 2020, 30 June 2021 and 30 June 2022
Residual value at the end of the lease term $15,000
Residual guaranteed by lessee Nil
The lease is non-cancellable
The economic useful life of the machine is: 6 years
Interest rate implicit in lease 8%
Required -
a) Calculate the present value of lease liability amount as at 1 July 2019.
b) Prepare the journal entries in relation to the lease for the year ending 30 Jun 2020.
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