Question: On 30 June 2016, Sherlock Ltd leased a processing plant to Holmes Ltd. The lease agreement contained the following provisions: Lease term Economic life of

On 30 June 2016, Sherlock Ltd leased a processing plant to Holmes Ltd. The lease agreement contained the following provisions:

Lease term Economic life of plant Annual rental payment, in advance (commencing 30/6/2016) Residual value at end of the lease term Residual guaranteed by lessee Interest rate implicit in lease The lease is cancellable only with the permission of the lessor.

The annual lease payments include executory costs of $10 000.

3 years 5 years $160 000 $90 000 $60 000 7%

Holmes Ltd intends to return the processing plant to the lessor at the end of the lease term. The lease has been classified as a finance lease by both the lessee and the lessor.

Required

Prepare: (a) the lease payment schedule for the lessee (show all workings)

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