Each scenario in this question is independent. Please read them carefully and answer each part. (a)...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Each scenario in this question is independent. Please read them carefully and answer each part. (a) Big Green Limited is a producer of apples. It enters into a contract with Freight Limited, a shipping company, for the transport of apples from Cape Town to Southampton on a specific ship. Freight Limited does not have substitution rights. The contract specifies the quantity, grade and packaging of the apples to be transported as well as the dates of departure and arrival. The apples will occupy substantially all of the capacity of the ship. Freight Limited operates and maintains the ship and is responsible for the safe transport of the apples and other cargo on board. Big Green Limited is not permitted to hire another operator for the ship or to operate the ship itself. Required: Discuss, with reference to IFRS 16 Leases, whether the arrangement contains a lease. (9 marks) (b) Big Green Limited is a producer of apples. It enters into a contract with Freight Limited, a shipping company, for the transport of apples for a three-year period on a specific ship. Freight Limited does not have substitution rights. Big Green decides on the quantity, grade and packaging of apples to be transported, the dates of travel and also the departure and arrival ports. It is also permitted to use spare capacity to transport produce from neighbouring farms. Freight Limited operates and maintains the ship and is responsible for its safe passage. It can restrict the ship from sailing into waters at high risk of piracy and can restrict the carrying of unsuitable cargo. Required: Discuss, with reference to IFRS 16 Leases, whether the arrangement contains a lease. (9 marks) (c) On 1 January 2017 Khan PLC entered into a lease to obtain the use of an item of plant for three years. Khan PLC incurred transaction costs of £30,000 which were immediately paid. Under the terms of the lease Khan PLC is obligated to make three annual payments of £100,000 in arrears. The interest rate implicit in the lease is 6%. The present value of the lease payments is £267,302. Required: In accordance with IFRS 16 Leases prepare the extracts from the financial statements of Khan PLC for the year ended 31 December 2017. Each scenario in this question is independent. Please read them carefully and answer each part. (a) Big Green Limited is a producer of apples. It enters into a contract with Freight Limited, a shipping company, for the transport of apples from Cape Town to Southampton on a specific ship. Freight Limited does not have substitution rights. The contract specifies the quantity, grade and packaging of the apples to be transported as well as the dates of departure and arrival. The apples will occupy substantially all of the capacity of the ship. Freight Limited operates and maintains the ship and is responsible for the safe transport of the apples and other cargo on board. Big Green Limited is not permitted to hire another operator for the ship or to operate the ship itself. Required: Discuss, with reference to IFRS 16 Leases, whether the arrangement contains a lease. (9 marks) (b) Big Green Limited is a producer of apples. It enters into a contract with Freight Limited, a shipping company, for the transport of apples for a three-year period on a specific ship. Freight Limited does not have substitution rights. Big Green decides on the quantity, grade and packaging of apples to be transported, the dates of travel and also the departure and arrival ports. It is also permitted to use spare capacity to transport produce from neighbouring farms. Freight Limited operates and maintains the ship and is responsible for its safe passage. It can restrict the ship from sailing into waters at high risk of piracy and can restrict the carrying of unsuitable cargo. Required: Discuss, with reference to IFRS 16 Leases, whether the arrangement contains a lease. (9 marks) (c) On 1 January 2017 Khan PLC entered into a lease to obtain the use of an item of plant for three years. Khan PLC incurred transaction costs of £30,000 which were immediately paid. Under the terms of the lease Khan PLC is obligated to make three annual payments of £100,000 in arrears. The interest rate implicit in the lease is 6%. The present value of the lease payments is £267,302. Required: In accordance with IFRS 16 Leases prepare the extracts from the financial statements of Khan PLC for the year ended 31 December 2017.
Expert Answer:
Answer rating: 100% (QA)
aYes the arrangement contains a lease Under IFRS 16 Leases a lease is defined as an agreement between two parties in which one party conveys the right to use an asset to the other party for an agreed ... View the full answer
Related Book For
Posted Date:
Students also viewed these business communication questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Bushman Ltd enters into a contract with Lessor Ltd for the use of a ship for one year. The ship is to be used to transport wood from central Queensland to the port of Brisbane. Lessor does not have...
-
On the income statement for the year ending December 31, Y1, the accountant for ABC calculated operating income before taxes of $300,000. This $300,000 did not include the effect of any of the...
-
On January 1, 2011, Darnell Window and Pane issued $18 million of 10-year, zero-coupon bonds for $5,795,518. Required: 1. Prepare the journal entry to record the bond issue. 2. Determine the...
-
The article cited in Exercise 20 also gave the following values of the variables y = number of culs-de-sac and z = number of intersections: a. Construct a histogram for the y data. What proportion of...
-
Distinguish between the main approaches to impact assessment. Explain the three steps that lead to construction of an EIA index. Can environmental impact added ever be negative?
-
Steve and Sue are married with three dependent children. Their 2016 joint income tax return shows $389,000 of AGI and $60,000 of itemized deductions made up of $30,000 of state income taxes and...
-
The following table presents the long - term liabilities and stockholders equity of Information Control Corporation from one year ago: Long - term debt $ 6 5 , 4 0 0 , 0 0 0 Preferred stock 4 , 0 4 0...
-
Use Worksheet 14.1 to help Paul and Crystal Meyer, whod like to retire in about 20 years. Both have promising careers, and both make good money. As a result, theyre willing to put aside whatever is...
-
Which type of personality are you as per Myers-Briggs Type Indicator. Proof using your personal examples.
-
Autonomous aggregate expenditures decreases by $200 million, the marginal propensity to consume is 0.50, marginal propensity to invest is 0.25, and the marginal propensity to import is 0.10....
-
A bicycle plant must produce 1952 bicycles per month to meet demand. The set-up costs for each production run are $1220 , and it costs $20 to store a bicycle for a month. How many production runs...
-
Use the following information to answer the next 4 questions: The managers of Camping World are considering manufacturing pop-up campers. They expect to sell 250 campers annually for the next 6...
-
The balance sheet for Bryan Corporation is given below. Sales for the year were $3,040,000, with 75 percent of sales sold on cre BRYAN CORPORATION Balance Sheet Dec. 31, 20XX Assets Liabilities and...
-
Consider a CT LTI system with input x(t), output y(t), and unit impulse response h(t). Determine y(t) = x(t) * h(t) for the following: (a) x(t) = etu(-t) and h(t) = 2u(t) - u(t-1)-u(t - 2) (b) x(t) =...
-
Rational choice theory is rooted in the classical school of criminology developed by: OB. Cesare Beccaria OD. Andrew Von Hirsch OA James Q. Wilson OC. Jeremy Bentham
-
"Standard-cost procedures are particularly applicable to process-costing situations." Do you agree? Why?
-
Between 1984 and 2001, the U.S. government made it much easier to get disability payments and the number of disabled people more than doubled from 3.8 million to 7.7 million. Most of the people who...
-
Suppose a friend is taking an economics course at another college or university and his professor uses a different textbook. Your friend, after learning about monopolies and the lost gains from trade...
-
A government is torn between selling annual pollution allowances and setting an annual pollution tax. Unlike in the messy real world, this government is quite certain that it can achieve the same...
-
Consider the purchases function of a manufacturing company. To overcome a downward profitability trend, management recently instituted a "just-in-time" system of acquiring raw materials for its...
-
Explain how creating a process map and internal threat analysis helps in determining the extent to which substantive testing is to be performed on the accounts associated with the supply chain and...
-
The following are routine procedures for the audit of the purchases process. For each procedure, (1) state whether it is a test of controls or a substantive test of transactions or balances, (2)...
Study smarter with the SolutionInn App