CALCULATE PRESENT VALUE OF LEASE

Prepare all relevant journal entries (narrations are not required) in Carry Ltds books from 1 July 2020 to 30 June 2021, explaining how the depreciation of the lease is calculated.

Prepare a schedule of lease payments for Carry Ltd

Prepare a schedule of lease payments for Carry Ltd

On 1 July 2020, Carry Ltd (lessee) entered into a lease agreement with Light Ltd (lessor), agreeing to lease a plant from Light Ltd for 4 years. The plant has a useful life of 5 years, after which it will have a residual value of $5,000, and to be depreciated using the straight-line method. The following details relating to the lease agreement are provided: $ 188,000 8,000 Fair value of plant at inception of lease Residual value of the plant at end of lease term, fully guaranteed by Carry Ltd Annual lease payment (1 st payment due on 30 June 2021) Interest rate implicit in the lease 55,000 6% An annual insurance and maintenance cost of $5,000 is to be borne by Carry Ltd. This payment is included in the annual lease payment given above as a reimbursement to Light Ltd. The lease is cancellable, but cancellation will incur a monetary penalty equivalent to the lease payment of the remaining terms in the contract. It is expected that Carry Ltd will purchase the plant from Light Ltd at the end of the lease