FR - IAS 33 ,IFRS 16

During the year ended 30 September 20X4 Hyper entered into two lease transactions.

On 1 October 20X3, Hyper made a payment of $90,000 being the first of five equal annual

payments under a lease for an item of plant. The lease has an implicit interest rate of 10%

and the present value of the total lease payments on 1 October 20X3 was $340,000.

On 1 January 20X4, Hyper made a payment of $18,000 for a one-year lease of an item of

equipment.

What amount in total would be charged to Hyper's statement of profit or loss for the year

ended 30 September 20X4 in respect of the above transactions?

• $108,000

• $111,000

• $106,500

• $115,500

Z entered into a five year lease agreement on 1 November 20X2, paying $10,975 per annum,

commencing on 31 October 20X3. The present value of the lease payments was $45,000 and

the interest rate implicit in the lease was 7%.

What is the amount to be shown within non-current liabilities at 31 October 20X3?

• $26,200

• $28,802

• $37,175

• $36,407

IFRS 16 Leases permits certain assets to be exempt from the recognition treatment for right-

of-use assets. Which of the following assets leased to an entity would be permitted to be

exempt?

• A used motor vehicle with an original cost of $15,000 and a current fair value of $700,

  leased for 24 months

• A new motor vehicle with a cost of $15,000, leased for 24 months

• A new motor vehicle with a cost of $15,000, leased for 24 months, to be rented to

  customers on a daily rental basis

• A new motor vehicle with a cost of $15,000, leased for 12 months

On 1 April 20X7 Pigeon entered into a five-year lease agreement for a machine with an

estimated life of 7 years. Which of the following conditions would require the machine to

be depreciated over 7 years?

• Pigeon has the option to extend the lease for two years at a market-rate rental

• Pigeon has the option to purchase the asset at market value at the end of the lease

• Ownership of the asset passes to Pigeon at the end of the lease period

• Pigeon's policy for purchased assets is to depreciate over 7 years

On 1 January 20X4 Badger entered into a lease agreement to lease an item of machinery for

4 years with rentals of $210,000 payable annually in arrears. The asset has a useful life of

5 years and at the end of the lease term legal ownership will pass to Badger. The present

value of the lease payments at the inception of the lease was $635,000 and the interest rate

implicit in the lease is 12.2%. For the year ended 31 December 20X4 Badger accounted for

this lease by recording the payment of $210,000 as an operating expense. This treatment

was discovered during 20X5, after the financial statements for 20X4 had been finalised.

In the statement of changes in equity for the year ended 31 December 20X5 what

adjustment will be necessary to retained earnings brought forward?

• $5,530 credit

• $132,530 credit

• $210,000 debit

• $Nil

Owl leases an asset with an estimated useful life of 6 years for an initial period of 5 years,

and an optional secondary period of 2 years during which a nominal rental will be payable.

The present value of the initial period lease payments is $87,000.

What will be the carrying amount of the right-of-use asset in Owl's statement of financial

position at the end of the second year of the lease?

On 1 January 20X6, Sideshow sold a property for its fair value of $2 million, transferring title

to the property on that date. Sideshow then leased it back under a 5-year lease, paying

$150,000 per annum on 31 December each year. The present value of rentals payable was

$599,000 and the interest rate implicit in the lease was 8%. The carrying amount of the

property on 1 January 20X6 was $1.6 million and it had a remaining useful life of 20 years.

What entries would be made in Sideshow's statement of profit or loss for the year ended

31 December 20X6?

• Profit on disposal of $280,200, depreciation of $95,840, finance cost of $47,920

• Profit on disposal of $400,000, rental expense of $150,000

• Profit on disposal of $400,000, depreciation expense of $95,840, finance cost of

  $47,920

• Profit on disposal of $280,200, depreciation of $119,800, finance cost of $47,920

On 1 October 20X3, Fresco acquired an item of plant under a five-year lease agreement. The

agreement had an implicit interest rate of 10% and required annual rentals of $6 million to

be paid on 30 September each year for five years. The present value of the annual rental

payments was $23 million.

What would be the current lease liability in Fresco's statement of financial position as at

30 September 20X4?

• $19,300,000

• $4,070,000

• $5000,000

• $3,850,000

Which of the following would not be included within the initial cost of a right-of-use asset?

• Installation cost of the asset

• Estimated cost of dismantling the asset at the end of the lease period

• Payments made to the lessor before commencement of the lease

• Total lease rentals payable under the lease agreement

On 1 January 20X4, Stark entered into a sale and leaseback of its property. When it was sold,

the asset had a carrying amount of $6 million and a remaining life of 10 years. Stark sold the

asset for $7 million and leased it back on a 10 year lease, paying $1 million on 31 December

each year. The lease carried an implicit interest rate of 7%.

What is the total expense that should be recorded in the statement of profit or loss for the

year ended 31 December 20X4?