Question

In: Accounting

An asset which could be purchased outright for £383,720 is instead leased by Lessee Ltd for...

An asset which could be purchased outright for £383,720 is instead leased by Lessee Ltd for three years at the end of which the asset will have no residual value. The lease provides for half-yearly payments in advance of £72,000, the first payment being made on 1 January 2018. The asset is to be depreciated using the straight line method.
Required:
(a) Show how the asset will be accounted for in the financial statements for the year ended 2018 under IAS 17 if:
(i) Lessee Ltd is responsible for all maintenance and insurance costs;
(ii) Lessee Ltd is not responsible for the maintenance and insurance costs.

(b) IFRS 16 Leases has changed how leases will be recognised in financial statements. Outline the key changes to lease accounting contained in IFRS 16 and discuss why these changes were considered to be needed.
Your answer to this part of the question should not be more than 150 words.

Solutions

Expert Solution

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

An asset which could be purchased outright for £383,720 is instead leased by Lessee Ltd for...
An asset which could be purchased outright for £383,720 is instead leased by Lessee Ltd for three years at the end of which the asset will have no residual value. The lease provides for half-yearly payments in advance of £72,000, the first payment being made on 1 January 2018. The asset is to be depreciated using the straight line method. Required: (a) Show how the asset will be accounted for in the financial statements for the year ended 2018 under...
On 1 July 2020, Brooklyn Ltd (lessor) leased Equipment to New Ltd (lessee). The lease agreement...
On 1 July 2020, Brooklyn Ltd (lessor) leased Equipment to New Ltd (lessee). The lease agreement contained the following: Annual Lease receivable on 1 July (in advance) $50,000 Lease Receivable on 1 July 2020 – measured at NPV net of initial lease receipts $176,992 What would be the journal entries on 1 July 2020 for the lessor (Brooklyn Ltd)?
a.) When should a leased asset (perspective of lessee) be depreciated over its lease term ?...
a.) When should a leased asset (perspective of lessee) be depreciated over its lease term ? Over it's economic life? b.) And when should a leased asset be amortized ? What is the difference between amortizing the leased asset and depreciating it ?
a.) When should a leased asset (perspective of lessee) be depreciated over its lease term ?...
a.) When should a leased asset (perspective of lessee) be depreciated over its lease term ? Over it's economic life? b.) And when should a leased asset be amortized ? What is the difference between amortizing the leased asset and depreciating it ?
Instead of purchasing assets outright many companies lease assets either for operational purposes or as a...
Instead of purchasing assets outright many companies lease assets either for operational purposes or as a means of asset acquisition. Please explain the differences between the 2 types of leases, capital and operating, and explain how both the lessee and the lessor view these arrangements and provide a clear discussion of the process each uses to determine whether to enter into a leasing arrangement.
Red Bear Ltd. purchased several intangible assets, as follows: Asset Purchase Cost Asset Purchase Cost Licence...
Red Bear Ltd. purchased several intangible assets, as follows: Asset Purchase Cost Asset Purchase Cost Licence $76,000 Patent $173,000 Customer list 62,700 Copyright 252,000 The following information is also available: ● In addition to the costs listed above, there were legal fees of $15,000 associated with the licence acquisitions. The licences are valid in perpetuity, and sales of the products produced under the licences have been strong and are expected to continue at the same level for many decades. ●...
Cheyenne Ltd. purchased a building on January 1, 2018 for $14,880,000. Cheyenne accounted for this asset...
Cheyenne Ltd. purchased a building on January 1, 2018 for $14,880,000. Cheyenne accounted for this asset using the revaluation model and revalued the building every two years. The building was estimated to have a useful life of 30 years with no residual value, and Cheyenne used straight-line depreciation. On December 31, 2019, the building had a fair value of $14,084,000. On December 31, 2021, the building had a fair value of $12,788,200. Prepare the journal entries on the books of...
On 1 January 2020, Lessee Ltd entered into a two-years lease with Lessor Ltd for a...
On 1 January 2020, Lessee Ltd entered into a two-years lease with Lessor Ltd for a equipment. The contract contains an option to extend the lease term for a further a year. Lessee Ltd ascertained that it is reasonably certain to exercise this option. The equipment has a useful economic life of 10 years. Lease payments are $25,000 per year for the initial term and $45,000 per year for the period when the option is exercised. All payments are due...
Indicate which of the following items could appear as an asset on the balance sheet of...
Indicate which of the following items could appear as an asset on the balance sheet of a business. Explainyour reasoning in each case. (3 points) €1,000 owed to the business by a credit customer who is unable to pay. A patent, bought from an inventor, that gives the business the right to produce a new product. Production ofthe new product is expected to increase profits over the period during which the patent is held. A recently purchased machine that is...
Company A is the Lessee. Company B is the Lessor. Company B rents an asset to...
Company A is the Lessee. Company B is the Lessor. Company B rents an asset to Company A for a term of 3 years. The economic life of the asset is 3 years. Therefore both Company A and Company B conclude that this lease contract is a Finance lease from Company A’s point of view. At the end of the lease term the asset is expected to have no residual value and so “residual value” is NOT a relevant matter...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT