QUESTION 1 PART A Sunrise 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. You are provided with the following lease details: Sunrise Ltd is the: Commencement date Lease term Economic life of asset Interest expense SCF classification IDC incurred by the lessee Upfront payment due on the commencement date Fixed payments per annum at year end Extra final payment at end of the lease Ownership transfer at end of lease Lessee's incremental borrowing rate The depreciation method used by the lessee The relevant present value discount factors are: Present value of $1 in n periods n=5 Present value of an annuity 8% Lessee 1 April 2019 5 years 7 years CFFA $4 600 $15 000 $160 000 $15 000 No 8% Straight line 0.6806 3.9927 Required: (1) Prepare the journal entry to initially recognise the ROU asset and lease liability, at the commencement date. (ii) Complete the lessee's table in the space provided. Determine the total interest expense that would be recognised in the Statement of Comprehensive Income over the five years of the lease. (iii) Prepare financial statements to reflect the effects of the lease for the financial years ended 31 March 2020, 31 March 2022, and 31 March 2024. QUESTION 1 PART A- Answer template (1) $ Dr $ Cr The journal entry to initially recognise the ROU asset: Upfront payment on commencement of lease 1/4/2019 15,000 (i) Workings: Lease payments Lease liability Discount factor Lease payments Interest expense (ii) Table for the Lessee Lease liability reduction Lease liability balance 8% Commencement of lease on 1 April 2019 31/3/2020 31/3/2021 31/3/2022 31/3/2023 31/3/2024 31/3/2024 (ii) The total interest expense recognised over the five years of the lease would be: $ QUESTION 1 PART A- Answer template continued: (iii) Sunrise Ltd Financial Statements Statement of Financial Position as at: 31 March 2020 31 March 2022 31 March 2024 Non-current assets: Current liabilities: Non-current liabilities: Statement of Comprehensive Income for the year ending: 31 March 2020 31 March 2022 31 March 2024 Por L section: OCI section: Statement of Cash Flows for the year ending: 31 March 2020 31 March 2022 31 March 2024 CFOA (Operating activities): CFFA: (Financing activities)