- 10 Marks
Title: FR – L2 – Q42 – Leases
Question
Fablon Limited leased a machine on 1 January 20X4 for four years. Lease payments of GH¢40,000 are payable in arrears annually. The interest rate implicit in the lease is 10% and the present value of the minimum lease payments is GH¢126,760.
Required
Show how the lease agreement would be presented in the statement of profit or loss for 20X4 and the statement of financial position at 31 December 20X4. Notes to the financial statements are not required.
Answer
Financial statements for the year-ended 31 December 20X4 (extracts)
Statement of financial position
| Non-current assets | GH¢ |
|---|---|
| Property, plant and equipment (126,760 – 31,690) | 95,070 |
| Current liabilities | GH¢ |
|---|---|
| Lease liability (W) | 30,056 |
| Non-current liabilities | GH¢ |
|---|---|
| Lease liability (W) | 69,380 |
Statement of profit or loss
| Operating expenses | GH¢ |
|---|---|
| Depreciation on leased assets (126,760 ÷ 4) | 31,690 |
| Finance costs | GH¢ |
| Lease charges (W) | 12,676 |
Working: Lease liability (machine)
| Date | Opening balance | Interest (10%) | Lease payment | Closing balance |
|---|---|---|---|---|
| 20X4 | 126,760 | 12,676 | (40,000) | 99,436 |
| 20X5 | 99,436 | 9,944 | (40,000) | 69,380 |
Current (balancing figure): 30,056
Non-current: 69,380
- Tags: Depreciation, Finance Costs, Financial Statements, IFRS 16, Lease Liability, Leases, Right-of-Use Asset
- Level: Level 2
- Uploader: Samuel Duah