On 1 January 2010, Qalam Ltd leases a machine to Shabs plc. The lease is for a
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On 1 January 2010, Qalam Ltd leases a machine to Shabs plc. The lease is for a term of three years and lease payments of EUR 2,000 per month are required. The machine has a useful life of eight years and would cost EUR 100,000 if bought for cash.
(a) Explain why the lease is an operating lease.
(b) Explain how the machine and the lease payments should be dealt with in the financial statements of Qalam Ltd, assuming that the company prepares its financial statements to 30 June each year.
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Related Book For
Advanced Financial Accounting An International Approach
ISBN: 9780273712749
1st Edition
Authors: Jagdish Kothari, Elisabetta Barone
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