Prepare a schedule of lease payments for field

Question

Summer Ltd entered into an agreement on 1 July 2010 to lease a harvester to Field Ltd. The lease agreement details are as follows:

• Length of lease: 5 years
• Annual lease payment, payable on 30 June each year: $8 000
• Estimated useful life of harvester: 8 years
• Fair value of harvester at 1 July 2010: $34 747
• Estimated residual at end of useful life: $2 000
• Residual at end of lease term (50% guaranteed) by Field Ltd: $7 200
• Interest rate implicit in the lease: 9%

Additional information:

1. The lease is cancellable, but a penalty equal to 50% of the total lease payments is payable on cancellation.
2. Field Ltd Ltd does not intend to buy the harvester at the end of the lease term.
3. Summer Ltd incurred costs of $1 000 to negotiate and execute the lease agreement.
4. Summer Ltd purchased the harvester for $34 797 just before the inception of the lease.

Required

Prepare a schedule of lease payments for Field Ltd, a schedule of lease receipts for Summer Ltd and journal entries to record the lease transactions for the year ended 30 June 2011 in the records of both companies