Explain what will be recognised in each of the statements

Reference no: EM132970679

Question: Public Finance Ltd, a finance company which provides leasing services for lessees acting as a lessor under lease arrangements. On 31 December 2020, Public Finance Ltd entered into a 4- year lease for a recycling machine with Kima Ltd. Kima leased a new weaving machine.

Details of the lease agreement are as follows:
· 4 lease payments of $250,000 are payable in advance on 31 December each year.
· Ownership transfers to Kima at end of lease term.
· Fair value of the machine at inception is $898,000.
· Public Finance incurred initial direct costs of $8075.
· Implicit rate of interest is 7%.

(a) Prepare the current and the non-current asset sections of Public Finance's statement of financial position and the income section of the statement of profit or loss and other comprehensive income for the year ending 31 December 2021 in to record the lease transactions as per AASB 16 Leases, assuming it is appropriately classified as a finance lease. (Ignore Tax)

(b) Explain what will be recognised in each of the statements in part (a) if the lease is appropriately classified as an operating lease instead of a finance lease. You are not required to perform any calculations.

Reference no: EM132970679

Questions Cloud

Identify the challenges fitbit : Identify the challenges Fitbit need to overcome affecting their implementation of international strategy. Answer this question in 400 words.

Determine the limits of the transfer : Does the proposed transfer price allow for a convergence of interests between the two units and the company as a whole - Determine the limits of the transfer

Examine three important role the world trade organization : Examine three important role the world trade organization plays in the Caribbean

Explain amazon positioning strategy : Explain Amazon's positioning strategy - in which countries it is already present and what is the value proposition

Explain what will be recognised in each of the statements : Explain what will be recognised in each of the statements in part (a) if the lease is appropriately classified as an operating lease instead of a finance lease

Calculate your companys wacc : Calculate your company's WACC - Your Company is asking you as a CFO to consider your capital costs for your long term investment projects

Calculate appropriate test statistic to test hypothesis : A recent study conducted by the state government attempts to determine whether the voting public supports a further increase in cigarette taxes. The opinion pol

What is the business report for armando : Discuss all relevant issues, including pros and cons of each course of action. Outline any questions/inquiries which should be directed to Armando

Identify a contemporary organizational behaviour issue : 1) CONTEMPORARY ISSUE IDENTIFICATION: Identify a contemporary (modern) organizational behaviour issue/concern your team would like to study and research for thi

User Account

All Pages