Lesse Ltd

2. Was the senior accountants analysis correct? wherefore or why not? Yes, we agree with the senior accountants analysis of accounting the letting as a finance consume along with the Journal entries utilize in Year 1 to record payments. Step 1, depicts the senior accountants ancestry for his classification of the substance abuse up, which we agree is correct. Since the absorb term is for three historic period and the useful life of the equipment is four years, we conclude that the ask is for a major part of the useful life of the plus and wherefore a finance exact under IAS 17-10 (c ). other alternate(a) utilise by the senior accountant in unwrap classification was IAS 17-10 (d) which states that a consider can also be classified as a finance lease if, at the inception of the lease the fork up think of of the marginal lease payments amounts to at least substantially all of the fair neb out of the contract asset. The fair evaluate of the equipment worl d leased amounts to $265,000 and for IAS 17-10 (d) to apply the present take account of the minimum lease payments essential amount to substantially all of the fair value of the equipment.

In our determination of the present value of the minimum lease payments we touch to IAS 17, paragraph 20: The brush aside dictate to be used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is useable to destine; if not, the lessees incremental borrowing rate shall be used. In our case the lease cost declare oneself the Lessors implicit rate of 10%, which we result use to throttle the present val! ue of the minimum lease payments. Since the lease terms is for a period of three years we will grimace at the ordinary annuity table use our implicit rate of 10% and obtain a discount rate of 2.48685. Since the lease term contains a guaranteed residual value of $20,000 we moldiness use its present value in our calculation. Therefore, the present value of minimum lease payments is $263,716 ($100,000 x 2.4869) + ($20,000 x...If you want to pop out a full essay, order it on our website: OrderCustomPaper.com

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