Question: AutoSave AA ? CG9 ... w- Final exam V2 567 - Saved to my Mac Q Search (Cmd + Ctrl + U) Home Insert Draw

AutoSave AA ? CG9 ... w- Final exam V2 567 -AutoSave AA ? CG9 ... w- Final exam V2 567 -AutoSave AA ? CG9 ... w- Final exam V2 567 -
AutoSave AA ? CG9 ... w- Final exam V2 567 - Saved to my Mac Q Search (Cmd + Ctrl + U) Home Insert Draw Design Layout References Mailings Review View Comments Editing Share Times New... 11 AA Aa v AL AaBbCcDdEe AaBbCcDdl AaBbCcDdEe aBbCcDc Paste BI U * 2 Av LAV Normal Body Text No Spacing Heading Styles Dictate Sensitivity Add-ins Editor Pane STUDENT NUMBER ENDS IN 5, 6, or 7 Question 1 (14 marks) Lowestoft Transport Inc. (LTI) wants to upgrade its fleet of highway transport trucks. The new trucks can be leased from the manufacturer, Malik Trucks Ltd. (MTL) for a period of six years. The lease will require an annual rental payment of $150,000, which includes $4,000/year for mandatory servicing that will be provided by the lessor. LTI will have to guarantee a residual value of $300,000 as part of the deal, although management expects that the fleet value will be well above $300,000 after six years. The implicit rate for the lease is 9%. The fair value of the fleet is estimated at $995,000. The trucks have a useful life of 10 years with no salvage value. Required: a) Assume LTI follows IFRS. Does the lease meet the recognition exemptions? Describe each recognition exemption and explain whether or not the lease meets each one. Recognition exemption Assessment and evidence of whether THIS lease meets the exemption 1 2 b) Provide the journal entry/ies to record the lease at its inception under IFRS. Calculations: Page 2 of 14 1929 words English (United States) to Accessibility: Investigate Focus E 88%AutoSave AA ? CG9 ... w- Final exam V2 567 - Saved to my Mac Q Search (Cmd + Ctrl + U) Home Insert Draw Design Layout References Mailings Review View Comments Editing Share Times New... 11 AA Aa v AL AaBbCcDdEe AaBbCcDdl AaBbCcDdEe aBbCcDc Paste BI U * 2 Av LAV E Normal Body Text No Spacing Heading Styles Dictate Sensitivity Add-ins Editor Pane STUDENT NUMBER ENDS IN 5, 6, or 7 DATE DR/ CR ACCOUNT DR CR (c) Now assume LTI follows ASPE. Classify the lease by describing each classification criterion and whether or not this lease meets each criterion. |Classification criteria Assessment and evidence of whether THIS lease meets the exemption 1 2 3 Page 2 of 14 1929 words English (United States) 16 Accessibility: Investigate Focus S E 88%AutoSave AA ? CG9 ... w- Final exam V2 567 - Saved to my Mac Q Search (Cmd + Ctrl + U) Home Insert Draw Design Layout References Mailings Review View Comments Editing Share Times New... 11 A A Aa v AL AaBbCcDdEe AaBbCcDdl AaBbCcDdEe aBbCcDc Paste BI U * 2 Av LAV Normal Body Text No Spacing Heading Styles Dictate Sensitivity Add-ins Editor Pane STUDENT NUMBER ENDS IN 5, 6, or 7 (d) Assume MTL is willing to offer a 10 year rent-to-own lease to LTI for the same fleet. At the end of the lease, fleet ownership would automatically transfer to LTI. MTL wants to recover the full fair value of its fleet through the lease. What annual lease payment should it offer to MTL? Additional space if needed: Page 4 of 14 1929 words English (United States) 16 Accessibility: Investigate Focus S E 88%

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

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

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!