On 1 January 2016, Neutron Ltd leased a new machine from Rich Finance for three years. Annual payments of $20,000 are payable in arrears, the first instalment being due on 31 December 2016.

The machine costs $56,500 and the estimated economic useful life of the asset is four years with nil residual value. The interest rate implicit in the lease is 4%.

Complete the following amortization schedule to determine the interest expenses and lease liability. 

Year ending	Lease Payable Beg. Bal	Interest Expense	Lease payment	Reduction in Lease liability	Lease Payable End. Bal
	$	$	$	$	$
31 Dec 2016
31 Dec 2017
31 Dec 2018

Complete the journal entries in the following table. 

	2016
	DR ($)	CR ($)
1. To record the lease contract
Right-of-use Asset - Machine (B/S)
Lease payable (B/S)
2. To record the first lease payment
Interest expense (P/L)
Cash
Lease payable (B/S)
Cash
3. To depreciation at the end of first year
Depreciation expense (P/L)
Accumulated depreciation (B/S)

Complete the following extracts of Statement of Financial Position and the related Disclosure

Note relating to the lease contract for the accounting years 2016.

	Statement of Financial Position as at		2016
		Note	$
	Current Liabilities
	Lease payable	2
	Non-Current Liabilities
	Lease payable	2
	Notes to the Accounts for the year ended
			2016
			$
2	Finance Lease Liabilities
	Minimum lease payments due
	- Not later than one year
	- Later than 1 year and not later than 5 years
	- Later than 5 years
	Less: Future finance charges
	Present value of finance lease liabilities
	The present value of finance lease liabilities
	- Not later than one year
	- Later than 1 year and not later than 5 years
	- Later than 5 years
	Total

Answer rating: 100% (QA)

Lets start by completing the amortization schedule Amortization Schedule Year ending 31 Dec 2016 Lea... View the full answer