lou Limited is a sweet wholesaler. On 1 January 2016, the company entered into an operating...

  

Transcribed Image Text:

lou Limited is a sweet wholesaler. On 1 January 2016, the company entered into an operating lease (as a lessee) over a company system. Details of the annual lease rentals, payable in arrears, are as follows: 2016 . 2017 to 2019 2020 2021 to 2023 RO R90 000 per annum 0 R30 000 per annum lou Limited's profit before tax is R2 700 000 in 2016 (correctly calculated). The tax authorities grant a 20% capital allowance on owned assets but allow a deduction from taxable profits of the lease payments if the asset is leased. The normal tax rate is 30%. There are no temporary differences other than those evident from the information provided. lou Limited satisfies the requirements to raise deferred tax assets. Required: 2.1 2.2 Prepare the 2016 journal entries with regard to the above lease agreement. Draft the following to fully disclose the above lease and its tax effect: - Statement of comprehensive income for the year ended 31 December 2016. - Statement of financial position as at 31 December 2016. - Notes to the financial statement for the year ended 31 December 2016. (9) (16) Note: that the accounting policy note is required, whist the deferred tax note is not required. Ignore VAT. lou Limited is a sweet wholesaler. On 1 January 2016, the company entered into an operating lease (as a lessee) over a company system. Details of the annual lease rentals, payable in arrears, are as follows: 2016 . 2017 to 2019 2020 2021 to 2023 RO R90 000 per annum 0 R30 000 per annum lou Limited's profit before tax is R2 700 000 in 2016 (correctly calculated). The tax authorities grant a 20% capital allowance on owned assets but allow a deduction from taxable profits of the lease payments if the asset is leased. The normal tax rate is 30%. There are no temporary differences other than those evident from the information provided. lou Limited satisfies the requirements to raise deferred tax assets. Required: 2.1 2.2 Prepare the 2016 journal entries with regard to the above lease agreement. Draft the following to fully disclose the above lease and its tax effect: - Statement of comprehensive income for the year ended 31 December 2016. - Statement of financial position as at 31 December 2016. - Notes to the financial statement for the year ended 31 December 2016. (9) (16) Note: that the accounting policy note is required, whist the deferred tax note is not required. Ignore VAT.

Answer rating: 100% (QA)

The provided images lay out a scenario involving a lease agreement and its associated accounting treatments for Iou Limited To address the two required tasks we will need to 1 Prepare the 2016 journal ... View the full answer