On 1 July, 2020 Moshman Ltd entered into a four-year lease of a large item of...

 

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On 1 July, 2020 Moshman Ltd entered into a four-year lease of a large item of mining equipment from Lessor Ltd. The terms of the lease agreement are as follows. • A payment of $100,000 is required on 1 July, 2020. • Four subsequent payments of $220,000 are due starting on 30 June 2021. • Moshman Ltd has no intention to extend the lease. The economic life of the equipment is estimated to be eight years. • Moshman Ltd has agreed to guarantee a residual value of $120,000. • The fair value of the machinery at the commencement of the lease is $1,001,154. • The interest rate implicit in the lease is 4 per cent. Assume that the contract is a lease for the purposes of AASB 16 'Leases'. REQUIRED: Prepare any necessary journal entries in the books of Moshman Ltd to record the lease in its first year (i.e. 1 July 2020 to 30 June 2021) in accordance with the requirements of AASB 16 "Leases'. Show all necessary working, explanations and assumptions to support your answer. On 1 July, 2020 Moshman Ltd entered into a four-year lease of a large item of mining equipment from Lessor Ltd. The terms of the lease agreement are as follows. • A payment of $100,000 is required on 1 July, 2020. • Four subsequent payments of $220,000 are due starting on 30 June 2021. • Moshman Ltd has no intention to extend the lease. The economic life of the equipment is estimated to be eight years. • Moshman Ltd has agreed to guarantee a residual value of $120,000. • The fair value of the machinery at the commencement of the lease is $1,001,154. • The interest rate implicit in the lease is 4 per cent. Assume that the contract is a lease for the purposes of AASB 16 'Leases'. REQUIRED: Prepare any necessary journal entries in the books of Moshman Ltd to record the lease in its first year (i.e. 1 July 2020 to 30 June 2021) in accordance with the requirements of AASB 16 "Leases'. Show all necessary working, explanations and assumptions to support your answer.

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Journal Entries in the books of Moshman Ltd for first year from 1 July 2020 to 30 June 2021 Date P... View the full answer