ACCT Corp. is a manufacturer of truck trailers. On 1 January 2020, ACCT Corp. leased a...

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Accounting

ACCT Corp. is a manufacturer of truck trailers. On 1 January2020, ACCT Corp. leased a trailer to a customer under a six-yearlease agreement. The following information about the lease and thetrailers is provided: 1. Equal annual payments of $10 816 are dueon 31 December each year. The interest rate implicit in the leaseis 8%. 2. The lease can be cancelled by the customer upon paymentof a penalty of $40,000. 3. There is a purchase option that thecustomer will be able to exercise at the end of the sixth year, for$2 000. The estimated fair value of the trailer at the end of thesixth year is $10 000. 4. The fair value of the trailer is $51,260.The cost of a trailer to ACCT Corp. is $45,000. The trailer has anexpected useful life of nine years.
REQUIRED: (1) What type of lease is this for the lessor? Provideexplanation and justification for your classification consideringAASB 16.
(2) Prepare the journal entries for the lessor from 1 January2020 to 31 December 2020 (the reporting period end of ACCT Corp.)to record the lease arrangement.

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As per AASB 16 A lessee must recognised the lease in its books as an asset and libility for all leases above 12 months The lessee must recognize the machine as an asset in its books of accounts and depreciation and interest paymnets See Answer

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