Happy Ltd prepares the following lease payments schedule for the lease of a machine from Feet...

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Happy Ltd prepares the following lease payments schedule for the lease of a machine from Feet Ltd. The machine has an economic life of 6 years. The lease agreement requires four annual payments of $23,000 by Happy Ltd to Feet Ltd. The machine will be returned to Feet Ltd at the end of the lease term. Date 1 July 20X1 1 July 20X2 July 20X3 1 July 20X4 1 July 20X5 Happy Ltd Lease Payments Schedule Interest Expense (10%) Lease Payments $20,000 $20,000 $20,000 $24,000 6,613 5,274 3,812 2,182 Reduction in Liability 13,387 14,726 16,198 21,819 Balance of Liability 66,130 52,743 38,017 21,819 Required The following questions relate to the information provided above. 1. For the year ended 30 June 20X2, what would be the journal entry that Happy Ltd would record for interest payable on the lease liability? 2. What would be the journal entry that would be recognised by Happy for the annual depreciation expense on their Right-of-Use Asset? 3. At 1 July 20X1 Happy Ltd recognises a lease liability of $66,130 and Feet Ltd (the lessor) records a lease receivable of $70,228. How would you explain the difference between these two amounts? Happy Ltd prepares the following lease payments schedule for the lease of a machine from Feet Ltd. The machine has an economic life of 6 years. The lease agreement requires four annual payments of $23,000 by Happy Ltd to Feet Ltd. The machine will be returned to Feet Ltd at the end of the lease term. Date 1 July 20X1 1 July 20X2 July 20X3 1 July 20X4 1 July 20X5 Happy Ltd Lease Payments Schedule Interest Expense (10%) Lease Payments $20,000 $20,000 $20,000 $24,000 6,613 5,274 3,812 2,182 Reduction in Liability 13,387 14,726 16,198 21,819 Balance of Liability 66,130 52,743 38,017 21,819 Required The following questions relate to the information provided above. 1. For the year ended 30 June 20X2, what would be the journal entry that Happy Ltd would record for interest payable on the lease liability? 2. What would be the journal entry that would be recognised by Happy for the annual depreciation expense on their Right-of-Use Asset? 3. At 1 July 20X1 Happy Ltd recognises a lease liability of $66,130 and Feet Ltd (the lessor) records a lease receivable of $70,228. How would you explain the difference between these two amounts?

Answer rating: 100% (QA)

1 Interest Expense Ac Dr 6613 To Lease liability 66... View the full answer