Skyline construction Limited. is negotiating a lease arrange with Modern Builders Limited for a machine. The following
Question:
Skyline construction Limited. is negotiating a lease arrange with Modern Builders Limited for a machine. The following agreement has been reached.
- The lease arrangement will be for 5 years
- The interest rate implicit in the lease will be 5%
- The lease agreement will come into full effect on January 1, 2020, with the first payment made on that date.
- Annual lease payments ? Note: Select an amount for the annual lease rental. The amount should be any value between $15000 to $55,000.
Requirement:
Demonstrate how the lease will be accounted in the financial statements over the five year period in the books of Skyline:
a. Calculate the present value of future lease payment.
b. Show the initial journal entries as required under IFRS 16 .
c. Prepare the amortization schedule for the lease.
d. Prepare the Income Statement and Statement of Financial Position (extract) for each of the five years.
Construction accounting and financial management
ISBN: 978-0135017111
2nd Edition
Authors: Steven j. Peterson