On 1 July 2021 Fairval Ltd (the lessee) contracts a leaseequipment for five years...

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Accounting

On 1 July 2021 Fairval Ltd (the lessee) contracts a leaseequipment for five years at an annual rental of $20,000, with thefirst payment payable immediately and subsequent annual paymentsdue on 30 June. The equipment could have been purchased from thesupplier for $80,747 on 1 July 2021 if leasing was not choseninstead. The rate of interest implicit in the lease is 12% and theend of the reporting period is 30 June. Assume the equipment isreturned to the lessor at the end of the lease, when the residualvalue of the equipment is nil.
1)
Provide general journal entries to record the lease on 1 July2021 for Fairval Ltd.
2)
Provide a schedule showing the division of the lease rental intointerest and principal components for the lessee over the term ofthe lease.
3)
Provide the depreciation schedule for the lessee assuming theright-of-use asset is depreciated over the term of the lease(straight-line method).
4)
Prepare the general journal entries for the lessee for theremaining term of the lease (not covered by part (1) of thisquestion) up until 30 June 2023.
5)
Based on the case, explain the motivation for the standardsetter to release the new lease standard (AASB 16).

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Part 1 20000 x 403735 80747 present value of 1 annuity due n5 year i 12 Date Account titles and explanation Debit Credit Jul 1 2021 Right of use assets 80747 Lease liability present value calculated 80747 Part 2 Time Lease Payment Interest at 12 of lease liabilityROU Principal Lease Liability Jul 1 2021 80747 Jul 1 2021 20000 See Answer

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In: AccountingOn 1 July 2021 Fairval Ltd (the lessee) contracts a leaseequipment for five years at...On 1 July 2021 Fairval Ltd (the lessee) contracts a leaseequipment for five years at an annual rental of $20,000, with thefirst payment payable immediately and subsequent annual paymentsdue on 30 June. The equipment could have been purchased from thesupplier for $80,747 on 1 July 2021 if leasing was not choseninstead. The rate of interest implicit in the lease is 12% and theend of the reporting period is 30 June. Assume the equipment isreturned to the lessor at the end of the lease, when the residualvalue of the equipment is nil.1)Provide general journal entries to record the lease on 1 July2021 for Fairval Ltd.2)Provide a schedule showing the division of the lease rental intointerest and principal components for the lessee over the term ofthe lease.3)Provide the depreciation schedule for the lessee assuming theright-of-use asset is depreciated over the term of the lease(straight-line method).4)Prepare the general journal entries for the lessee for theremaining term of the lease (not covered by part (1) of thisquestion) up until 30 June 2023.5)Based on the case, explain the motivation for the standardsetter to release the new lease standard (AASB 16).

1)	Provide general journal entries to record the lease on 1 July2021 for Fairval Ltd.
2)	Provide a schedule showing the division of the lease rental intointerest and principal components for the lessee over the term ofthe lease.
3)	Provide the depreciation schedule for the lessee assuming theright-of-use asset is depreciated over the term of the lease(straight-line method).
4)	Prepare the general journal entries for the lessee for theremaining term of the lease (not covered by part (1) of thisquestion) up until 30 June 2023.
5)	Based on the case, explain the motivation for the standardsetter to release the new lease standard (AASB 16).