On 31 March 2021, JJ Ltd has entered into an agreement to lease a machine from a manufacturer, AA Ltd.

Length of lease, non-cancellable 5 years Commencement date 1 July 2021

Annual lease payment, commencing 1 July 2021 $20,000

Usual selling price of (fair Value) the Machine at 1 July 2021 $80,000

Lessors carrying amount of the machine at 1 July 2021 $70,000

Estimated useful life of the Machine 7 years Estimated residual value of the plant at the end of its economic life $7,500

Residual value at the end of the lease term, 100% is guaranteed by Jubilee Ltd. $3,000

Interest rate implicit in the lease 12%

Required: (a) Prepare a schedule of lease payments for the entire lease term and the journal entries for JJ Ltd in respect of the lease for the financial year ended 30 June 2022 and 2023 only. (b) Prepare a schedule of lease receipts for the entire lease term and the journal entries for the manufacturer, AA Ltd for the financial year ended 30 June 2022 and 2023 only in respect of the lease for the lease term .

The following page contains some templates that you can use to answer the question.

Schedule of Lease Payments Year Lease Liability Lease Liability Opening Bal. after Lease Instalment $ Payment $ After payment Interest @ 12% $ Lease Liability Closing Bal. $ Schedule of Lease Receipts Year Lease Receivable and Interest Receivable Opening Lease Instalment Received 1st July Lease Receivable after receiving the instalment Interest Income Lease receivable including Interest Receivable 30th June