Lessee Ltd has requested your help in preparing their financial statements as they are unsure of the new requirements of NZ IFRS 16 Leases for lessees.

The lease details have been provided below:

Required:

(i) Prepare the journal entry to initially recognise the ROU asset on the commencement date. Show your workings.

(ii) Complete the table in the answer booklet.

(iii) Prepare financial statements, over the lease period, to reflect the effects of the lease. Lessee Ltd classifies interest expense paid as a cash flow from operating activities.

(iv) Prepare all the necessary journal entries, in relation to the lease, on 31 March 2022.

1 April 2019 $30 000 3 years Commencement date Upfront payment due on the commencement date Lease term Fixed payments per annum at year end IDC incurred by the lessee Purchase option - Lessee Ltd is reasonably certain it will exercise the option Lessee's incremental borrowing rate Economic life of asset Depreciation method used by the lessee The relevant present value discount factors are: Present value of $1 in n periods >= 3 i=6% Present value of an annuity n=3 1-6% $100 000 $ 806 $50 000 6% 5 years Straight line 0.8396 2.6730 QUESTION 1 Lessee The journal entry to initially recognise the ROU asset: Dr (i) 1/4/2019 Cr Working for (i): (ii) Table Lease payments etc. Interest expense Lease liability reduction Lease liability balance 6% Commencement of lease 01/4/2019 31/3/2020 31/3/2021 31/3/2022 31/3/2022 (iii) Lessee Ltd financial statements over the lease period: Lessee Ltd Statement of Financial Position as at 31 March: 2020 2021 Non-current assets: 2022 Current liabilities: Non-current liabilities: Lessee Ltd Statement of Comprehensive Income for the year ended 31 March: 2020 2021 2022 Por L section: OCI section: Lessee Ltd Statement of Cash Flows for the year ended 31 March: 2020 2021 2022 CFOA: CFFA: (iv) Journal entries required on 31 March 2022. Dr Cr 31/3/2022