Sign in to edit and save changes to this file HS011 Advanced Frandal Accounting Trimester 3/2016 Page 3 of 4 Required: a) b) Prepare the journal entries for the costs incurred 2014, 2015 and 2016 (using the area-of-interest method of accounting) (13 marks) Explain the difference between Area of Interest method and Full-cost method? (2 marks) Question 6 (15 marks) Alfalfa Machinery P/L enters into a lease (to a lessee) agreement and leases harvesting equipment to Bushel Holdings Ltd. The lease consists of the following Date of inception: Duration of lease: Life of leased asset: Lease payments (annual) 4 years 5 years $160,000 (annual) includes $15,000 for . maintenance and insurance costs per annum $70,000 (added to final payment Implicit rate of interest is 11.5% (is this the actual rate?) Fair value: S490.384 The asset was acquired on 12/11/2012 Required: a) Check that the implicit rate is correct against FV. (4 marks) b) Do the journal entries for the Lessor (using the Net Method) for acquisition, transfer of control, annual payments (2013 and 2014) and for final payment (2016) (9 marks) Explain the difference between a Finance lease and an Operating lease (2 marks) c)