Compute the interest rate implicit in the lease

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Question - On 1 July 2020 the Oxford University enters into a 5-year lease of a building owned by COMSI which has a remaining useful life of 10 years. Annual lease payments amount to $50,000 and are payable on 30 June each year. Initial direct costs (paid on 1 July 2020) incurred by the University to ensure social distancing and Oxford University's internal sanitary standards amount to $20,000. The University has also received on 1 July 2020 incentives from COMSI amounting to $5,000. The fair value of the asset amounts to $358,150. The unguaranteed residual value at the end of 30 June 2025 is $200,000.

Required - Using the provisions of IFRS 16,

a) Compute the interest rate implicit in the lease (rounded off to the nearest integer) using trial rates of 3% and 7%.

b) What is the extract of the lease amortisation table for years ended 30 th June 2021 and 2022.

Reference no: EM132598648

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