Question

In: Accounting

On 1 January 2017 Kuntan Ltd entered into an operating lease contract for premises in the...

On 1 January 2017 Kuntan Ltd entered into an operating lease contract for premises in the
Windhoek Weinhill Mall. The lease is to run for a period of 4 years (contract expires on 31
December 2020). As a result of several factors , the board of directors decided on 31 December
2018 to move the entity to Merua Mall with effect from 2 January 2019. However the lease contract
determines the following:
Operating lease payments per year (no escalation) N$10 000
Fine payable on early cancellation of the contract N$20 000
The premises cannot be sub-let. The company’s year end is 31 December. A 12% market disc rate
is expected to be applicable over a lease period.

Required:
1.2 Discuss and determine the impact of the issue in the financial statements in 2019
and 2020.
14

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