Reference no: EM132752468

On December 31, 2020, the lease agreement owned by Bahtera Maju (Tenant) and Sejahtera (the lessor) has ended. The lease is initially for 10 years. At the inception date of the lease, the asset is expected to have a useful life of 15 years.

The lease agreement has a bargain purchase option that gives the lessee the option to purchase the asset for $ 10,000 at the end of the lease term. As of December 31, prior to payment of the optional lease, PT Bahtera Majum has the following balance and accounts related to this lease:

Usage rights assets $ 75,000
Accumulated Depreciation of $ 50,000
Lease Liability $ 10,000

You are asked:

Problem 1: Prepare the required journal entries in accordance with IFRS 16-Rent, for each of the following separate situations:

a) Bahtera Maju decided to use the option and pay the amount the optional lease payment to transfer title to the asset.
b) Bahtera Maju decided not to use the option and, therefore, did not pay the amount of the optional lease payments at the end of the lease period.