Jack plc entered into a non-cancellable lease agreement for an item of machine on the following...
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Jack plc entered into a non-cancellable lease agreement for an item of machine on the following terms: Fair value of the machine: €10,000 Lease term: 5 years Five annual rentals payable in advance of €2,100 Lessor's unguaranteed estimated residual value at the end of five years: €1,000 Implicit interest rate in the lease: 6.62% per annum Commencement date: 1 Jan 2018 Lessee's financial year-end: 31 December Note: the present value of an ordinary annuity of €1 per year for 4 years at 6.62% interest is €3.42. REQUIRED: (a) Determine whether this lease represents a finance lease or an operating lease in accordance with IFRS 16 (show all your workings); (b) Prepare the income statement and balance sheet extracts for the years ended 31 December 2018 to 2022. Jack plc entered into a non-cancellable lease agreement for an item of machine on the following terms: Fair value of the machine: €10,000 Lease term: 5 years Five annual rentals payable in advance of €2,100 Lessor's unguaranteed estimated residual value at the end of five years: €1,000 Implicit interest rate in the lease: 6.62% per annum Commencement date: 1 Jan 2018 Lessee's financial year-end: 31 December Note: the present value of an ordinary annuity of €1 per year for 4 years at 6.62% interest is €3.42. REQUIRED: (a) Determine whether this lease represents a finance lease or an operating lease in accordance with IFRS 16 (show all your workings); (b) Prepare the income statement and balance sheet extracts for the years ended 31 December 2018 to 2022.
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a As per IFRS 16 Finance lease is the lease where the lessor gives the asset t... View the full answer
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Accounting What the Numbers Mean
ISBN: 978-0073527062
9th Edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,
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