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Prepare the lease payment schedule for cerise ltd

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Question - On 1 July 2011, Cerise Ltd leased a crane from Azure Ltd. The crane cost Azura Ltd $120,697. The lease agreement contained the following provisions:

Lease term

3 years

Estimated useful life of crane

4 years

Annual lease payment, payable on 30 June each year

$39,000

Estimated residual value of crane at end of lease term

$22,000

Residual value guaranteed by Cerise Ltd

$16,000

Interest rate implicit in lease

7%

The lease is cancellable only with the permission of the lessor.

Required:

(a) Classify the lease for Cerise Ltd.

(b) Prepare the lease payment schedule for Cerise Ltd and its journal entries to record the lease for the year ended 30 June 2012.

Reference no: EM131792836

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