In: Accounting
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 |