On 1 July 2017, ABE Ltd entered into an agreement to lease a vehicle from Cat Ltd. The present value of the vehicle on this date was $92,910. The lease agreement contained the following information.

Lease term: five years
Economic life of vehicle: six years
An initial deposit of $10,000
Five annual lease payments of $23,000 on 30 June each year in arrears.
Interest rate implicit in the lease: 12%
The vehicle will be returned to Cat Ltd at the end of the lease period.

Required:

• Prepare a lease schedule for ABE Ltd for the lease period.
• Prepare general journal entries to record the lease in the books of the lessee for the year ending June 2018.
• Provide an extract of the income statement and the balance sheet of ABE Ltd as at 30 June 2019

Answer rating: 100% (QA)

Present value 92910 Lease term 5 years Annual lease payment 23000 IRR 12 Vehicle was retu... View the full answer