QUESTION $1$

Green Tea $4$ Life Ltd has requested your help in preparing their financial statements as they

are unsure of the requirements of NZ IFRS $16$ Leases for lessees.

You are provided with the following lease details:

Green Tea $4$ Life Ltd is the: Lessee

Commencement date $1$ April $2019$

Lease term $5$ years

Economic life of asset $10$ years

Interest expense SCF classification CFOA

IDC incurred by the lessee $$10000$

Upfront payment due on the commencement date $$30000$

Fixed payments per annum at year end $$200000$

Ownership transfer at end of lease No

Lessee$$s incremental borrowing rate $8\%$

The depreciation method used by the lessee Straight line

The relevant present value discount factors are:

Present value of $$1$ in n periods n $=50\mathrm{.}6806$

Present value of an annuity i $=8\%3\mathrm{.}9927$

$($i$)$ Prepare the journal entry to initially recognise the ROU asset and lease liability, at the commencement date.

$\backslash$table$[[($i$),$The journal entry to initially recogaine the ROU asset:,$ Dr$,$$Cr$],[\frac{1}{4}\frac{?}{2019},,,],[,,,],[,,,],[,,,],[,,,]]$

$\backslash$table$[[($i$)$ Workings:,Lease payments,$\backslash$table$[[$Discount$],[$facter$]],$Lease liability$],[,,,],[,,,]]$

$($ii$)$ Complete the lessee's table in the rpace provided.

Determine the fotal ieterest expense that woold be necopnised in the Statement of Comprehensive lncome ever the five years of the lease.

$\backslash$table$[[\backslash$table$[[($ii$)$ Table for the$],[$Lessee$]],\backslash$table$[[$Lease$],[$payments$]],\backslash$table$[[$Interest$],[$expenue $8\%6$