Zumba Ltd entered into an agreement to lease specialised equipment for a five-year period, commencing January 1, 2021. A

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Zumba Ltd Entered Into An Agreement To Lease Specialised Equipment For A Five Year Period Commencing January 1 2021 A 1 (103.75 KiB) Viewed 63 times

Zumba Ltd entered into an agreement to lease specialised equipment for a five-year period, commencing January 1, 2021. At that date, the equipment had a remaining useful life of only four years. Annual lease payments total $6.4 million, 12% of which relates to insurance costs. The entity incurred expenses to the tune of $672,000 to draft the lease, while it received lease incentives amounting to $212,000. The agreement speaks to a guaranteed residual value of $2,800.000. The interest rate implied in the lease is 9%, while the incremental borrowing rate is 4% higher. REQUIRED: • Prepare the relevant journal entries in the last year of the lease. • Prepare the statement of financial position extract in the first year of the lease.