Question

Agri Machinery P/L enters into a lease (to a lessee) agreement and leases harvesting

equipment to Grain Holdings Ltd. The lease consists of the following;

 Date of inception:	1/1/13
 Duration of lease:	4 years
 Life of leased asset:	5 years
 Lease payments (annual):	$160,000 (annual) includes $15,000 for

maintenance and insurance costs per annum.
 $70,000 (added to final payment)
 Implicit rate of interest is 11.5% (is this the actual rate)
 Fair value: $490,384
The asset was acquired on 12/11/2012
Required;
a) Check that the implicit rate is correct against FV.
b) Do the journal entries for the Lessor (using the Net Method) for acquisition,
transfer of control, annual payments (2013 and 2014) and for final payment (2016)

Answer 1