Show the effect of the lease on the income statement

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Question - On 1 January 2020 Gorge Ltd acquired the use of a machine. Gorge Ltd entered into a lease agreement with the machine suppliers to pay six semi-annual instalments of £800,000 over the next three years starting on end of June 2020. The half-yearly interest rate of the lease is 10%.

(N.B: for working calculation consider every annual instalment as a period).

Required -

a. Show the effect of the lease on the Income Statement and the statement of financial position of Gorge Ltd for the year end 31 December 2020.

b. What have been the impacts of the application of the IFRS 16 "Leases" on the financial statements?

Reference no: EM133104356

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