Question: (i) Different accounting practices for leases are an area that, without a robust accounting standard, can be used to manipulate a company's financial statements. IAS

(i) Different accounting practices for leases are an area that, without a robust accounting standard, can be used to manipulate a company's financial statements. IAS 17, Leases, was revised in 1999 and has as its objective to prescribe the appropriate accounting policies and disclosures for financial and operating leases.
Required:
Summarize the effect on the financial statements of a lessee treating a lease as an operating lease as opposed to a finance lease, and describe the factors that normally indicate a lease is a finance lease.
(ii) Gemini leased an item of plant on 1 April 20X1 for a five-year period. Annual rentals in advance were $60 000. The cash price (fair value) of the asset on 1 April 20X1 was $260 000. The company's depreciation policy for this type of plant is 25% per annum on the reducing balance.
Required:
Assuming the lease is a finance lease and the interest rate implicit in the lease is 8%, prepare extracts of the financial statements of Gemini for the year to 31 March 20X3.

Step by Step Solution

★★★★★

3.45 Rating (165 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

i The accounting treatment of leases is an example of the application of substance over legal form If this principle is not followed it can lead to off balance sheet financing The treatment of a lease ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

802-B-A-F-R (2717).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

The following questions are adapted from a variety of sources including questions developed by the AICPA Board of Examiners and those used in the Kaplan CPA Review Course used to study lease...

The following figures have been extracted from the accounting records of Lavalamp on 30 September 20X3: (i) Lavalamp has spent $6 million (included in the cost of sales) during the year developing...

Financial planning can be more complex than the percentage of sales approach. Often, the assumptions behind the percentage of sales approach may be incorrect. For example, if the amount of fixed...

(i) Different accounting practices for leases are an area that, without a robust accounting standard, can be used to manipulate a companys financial statements. IAS 17 Leases was revised in 1999 and...

Why are there no revised statements of cash flows in Note 2 of 2009 10-K/ A (Exhibit #3) SECTION FIVE FINANCIAL STATEMENT ANALYSIS The following tables present the effects of the retrospective...

Hi! Attached is the case study. My questions for this case study is Conceptual (C)C3.3) on page 8. Conceptual (C) C3.3) Do you believe the independence rules are sufficient to ensure that the public...

Income statement and statement of comprehensive income for Hansenpheet plc. AC330 - Financial Accounting, Analysis and Valuation Class Exercise Pack 2012-13 Lent Term 2013 Professor Richard Macve The...

write an accounting essay 300-400 words as the file required and also part 2 and part 3. Part 1: Prepare an essay 300-400words addressing the conceptual questions for Recording Capital Leases,...

MANAGEMENT 120B Prepare a letter to explain the difference between operating and capital leases and answer the following questions which relate to 2011 Whole Foods Market, Inc. financial statements,...

State your agreement/disagreement and explain your answer: A taxpayer who intends to challenge an IRS tax assessment should carefully consider several factors when selecting the court in which to...

Explain the use of strategic option in valuation. Explain how strategic options are often abused in valuation.

Pay frequency is bi-weekly, paid $20 hourly and works 20 hours per week. Why is there no federal income tax taken out? Individual did not claim exemption on W-4

Define acculturation.

Use the CAFR information for the City of Salem (Illustrations 22 through 216) to find the following items. In your answer, both indicate which financial statement contained the information and the...

Use the CAFR information for the City of Salem (Illustrations 22 through 216) to find the following items. Each item will appear in two separate financial statements. In your answer indicate both...

Jennifer's manager Dr. Jonathan Steinberg wonders whether Healthy Life members needed more chiropractic help in 2020 than in 2019, on average. Jennifer selected a random sample of those who were...

Naomi receives a report of smishing. What type of attack should she be looking for? Group of answer choices A . Compressed files in phishing B . Text message based phishing C . Voicemail - based...

Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return Aggressive Stock Defensive Stock 8% 2.5% 4.3% 20 27 14 a....