QUESTION 1 PART B Cheap Finance Ltd has requested your help in preparing their financial statements as they are unsure of the new requirements of NZ IFRS 16 Leases for lessors. You are provided with the following lease details: Cheap Finance Ltd is the: Lessor Commencement date 1 April 2019 Lease term years Lease classification Finance Lease Upfront payment due on the commencement date $40 000 Fixed payments per annum received at year end $120 000 Extra final payment at end of the lease $40 000 Ownership transfers to the lessee at end of lease Yes IDC incurred by the lessor $0 The interest rate implicit in the lease 8% Economic life of the asset 8 years The depreciation method used by the lessor Straight line The relevant present value discount factors are: Present value of $1 in n periods n = 7 0.5835 Present value of an annuity i = 8% 5.2064 Interest income SCF classification CFIA The accountant, who is now on leave, has provided you with the lease receipts table. Table for the Lease Interest Income Finance Lease Finance Lease Lessor Receipts 8% Receivable Reduction Receivable Balance Commencement of lease on 1 April 2019 648 108 81/3/2020 120 000 51 849 68 151 579 957 31/3/2021 120 000 46 397 73 603 506 354 31/3/2027 120 000 40 508 79 492 426 862 31/3/2023 120 000 34 149 85 851 341 011 31/3/2024 120 00 27 281 92 719 248 292 31/3/2025 120 000 19 863 100 137 148 153 31/3/2026 120 000 11 845 108 155 40 000 31/3/2026 40 000 40 000 5880 000 231 892 5648 108 Required: (i) Prepare financial statements for Cheap Finance Ltd to reflect the effects of the lease for the financial periods ending 31 March 2020, 2021, 2025, and 2026