On 1 January 2019, GLA plc entered into an agreement to lease a machine for...
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On 1 January 2019, GLA plc entered into an agreement to lease a machine for general use in the business. The agreement, which may not be terminated by either party to it, runs for three years and provides for GLA to make an annual rental payment of $200,000 on 1 January each year. The rate of interest implicit in the lease is 8% annually (The Cumulative present value of $1 per annum 2.78326).
The cost of the machine to the lessor was $550,000, and it has no residual value. The machine has a useful economic life of four years and GLA depreciates its property, plant and equipment using the straight-line method.
Required:
You are required to finalize the following in the books of GLA plc (Lessee).
Record the necessary journal entries at the date of the inception of the lease.
Prepare a Lease Amortization Schedule for the Lessee.
Record the journal entry for the accrued interest at December 31, 2020.
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