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On 1 July 2020, Mango Ltd leases an aircraft from Kulula Led for five years. The fair value of the aircraft is $9.5 million. Under the terms of the...
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The following is the attachment for the lease financial accounting

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On 1 July 2020, Mango Ltd leases an aircraft from Kulula Led for five years. The fair value of the
aircraft is $9.5 million. Under the terms of the lease arrangement, Mango Ltd is required to make
five annual payments of $2 million with the first payment due immediately. Each repayment
includes $120,000 for maintenance arranged by the lessor. The lease has an interest rate of 13%.
The residual value of the aircraft is $3 million, of which Mango guarantees 65%. The aircraft has a
useful life of six years.
Required (round all answers to the nearest dollar)
i
Calculate the present value of Mango's minimum lease payments.
2 marks
ii
Prepare journal entries in Mango's books on 1 July 2023
3 marks
Treat the following scenarios as independent e.g. your answer to (iii) does not affect your answer
to (iv) and (v).
iii
Before the lease agreement was finalized, Kulula Ltd offered Mango Ltd the
4 marks
opportunity to purchase the aircraft for $1.5 million at the end of the lease.
Outline the benefits and risks to Mango Ltd if it accepts the proposal,
providing supporting calculations.
iv
Kulula Ltd is an aircraft manufacturer.
3 marks
Prepare Kulula's journal entries at inception of the lease, assuming it makes a

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