Question 5 (10 marks)

Mini Ltd leased a machine from Levi Ltd. The lease is for an item of machinery that, at the inception of the lease, has a fair value of $1,298,674. There is a bargain purchase option that Mini Ltd will be able to exercise at the end of the fifth year for $260,000.

The terms of the lease are as follows:

• Date of entering lease: 1 July 2019.
• Duration of lease: five years.
• Life of leased asset: six years.
• Lease payments: $320,000 on 30 June each year (starting 30 June 2020).
• Included within the $320,000 lease payments is an amount of $20,000 representing payment to the lessor for the insurance and maintenance of the equipment.
• Interest rate implicit in the lease: 10 per cent.
• The equipment is to be depreciated on a straight-line basis.

1. Prepare the portion of the statement of financial position for the year ending 30 June 2020 relating to the lease asset and lease liability (current and non-current portion). (4 marks)