In: Accounting
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,