Definition for conceptual framework

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Joyce Ltd produces and sells masks. On 1st July 2019, Joyce Ltd entered a non-cancellable lease contract to lease equipment used in the manufacture of the masks. According to the term of the contract, Joyce Ltd can use the leased equipment to produce the masks for 5 years. Rent is paid at the end of each year. During the lease term, Joyce Ltd can decide how and when to use the equipment. While Joyce Ltd expects to use the equipment, Joyce Ltd could also choose to sublease the equipment to a third party. The cost of the lease contract is known. This above transaction is recorded by the entry as follows.

1st July 2019

Dr. Leased asset - Equipment xxx

Cr. Lease liability xxx

Required

Question 1: Please justify the recognition of the Asset based on the definition and recognition criteria in the conceptual framework.

Reference no: EM132494838

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