Tallin plc entered into a lease for a machine on 1 st July 20X8. The lease details
Question:
Tallin plc entered into a lease for a machine on 1stJuly 20X8. The lease details are as follows:
Length of lease | 5 years |
Annual payments | £2,500 payable in arrears |
Present value of lease payments | £10,531 |
Deposit paid 1stJuly 20X8 | £1,469 |
Interest rate implicit in the lease | 6% |
Useful life of the asset | 6 years |
Requirement
1. Prepare the relevant Statement of profit or loss extract in respect of the above lease for the year ended 30thJune 20X9.
2. Prepare the Statement of financial position extract as at 30thJune 20X9 with respect to the lease liability.
You may round to the nearest whole number. Show your workings.
3. Tallin leases its office space. The contract entitles Tallin to the exclusive use of the third floor of an identified building together with shared use of the entrance, lobby and lifts. Explain how Tallin should account for the contract in accordance with IFRS 16 Leases.
4. State ONE of the two exemptions allowed in IFRS 16 that allows a lease to be treated as an operating lease.
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain