On 1 January 2017 Kuntan Ltd entered into an operating lease contract for premises in the Windhoek Weinhill Mall. The lease is to run for a period of 4 years (contract expires on 31 December 2020). As a result of several factors , the board of directors decided on 31 December 2018 to move the entity to Merua Mall with effect from 2 January 2019. However the lease contract determines the following: Operating lease payments per year (no escalation) N$10 000 Fine payable on early cancellation of the contract N$20 000 The premises cannot be sub-let. The company’s year end is 31 December. A 12% market disc rate is expected to be applicable over a lease period. 

Required: 

Discuss and determine the impact of the issue in the financial statements in 2019 and 2020.

Answer rating: 100% (QA)

Since Kuntan Ltd cannot sublet the leased property there are only two options available to it 1 Canc... View the full answer