Hawthorne Pty Ltd sold a building to Kew Ltd on 1 July 2019 for $3 500 000

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Hawthorne Pty Ltd sold a building to Kew Ltd on 1 July 2019 for $3 500 000 cash and immediately leased it back for 10 years. Annual lease payments are $500 000 and the first payment is due on 30 June 2020. At that time, the fair value of the building was $3 200 000 and its carrying amount was $2 800 000. The interest rate implicit in the lease is 10%. The terms and conditions of the transaction are such that the transfer of the asset is a sale in accordance with the requirements in AASB 15.

Required

(a) Prepare the general journal entries in the books of Hawthorne Pty Ltd on 1 July 2019 in accordance with the provisions of AASB 16 ‘Leases’.

(b) Prepare the general journal entries in the books of Kew Ltd on 1 July 2019 in accordance with the provisions of AASB 16 ‘Leases’.

Posted Date: Nov 19, 2021 08:01 AM

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Hawthorne Pty Ltd sold a building to Kew Ltd on 1 July 2019 for $3 500 000

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Expert Answer:

a Finance Lease Lessee Hawthorne Pty Ltd Journal Entry at July 1 2019 07012019 Cash 350000000 Buildi... View the full answer

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