Lesse Ltd

2. Was the senior controllers analysis correct? wherefore or why not? Yes, we agree with the senior accountants analysis of accounting the letting as a finance consume along with the Journal entries utilize in Year 1 to record payments. Step 1, depicts the senior accountants arguing for his classification of the adopt, which we agree is correct. Since the have term is for three diachronic period and the intentful life of the equipment is four years, we conclude that the strike is for a major part of the useful life of the summation and wherefore a finance allow under IAS 17-10 (c ). some other alternate(a) utilise by the senior accountant in consider classification was IAS 17-10 (d) which states that a direct can also be classified as a finance lease if, at the inception of the lease the limn think of of the negligible lease payments amounts to at least substantially all of the fair broadsheet out of the contract asset. The fair pry of the equipment cosmos leased amounts to $265,000 and for IAS 17-10 (d) to apply the present cling to of the minimum lease payments essential amount to substantially all of the fair value of the equipment.

In our determination of the present value of the minimum lease payments we touch to IAS 17, paragraph 20: The dismiss dictate to be used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is operable to destine; if not, the lessees incremental borrowing rate shall be used. In our case the lease cost reserve the Lessors implicit rate of 10%, which we willin g use to throttle the present value of the ! minimum lease payments. Since the lease terms is for a period of three years we will grimace at the ordinary annuity table victimization our implicit rate of 10% and obtain a discount rate of 2.48685. Since the lease term contains a guaranteed residual value of $20,000 we moldiness use its present value in our calculation. Therefore, the present value of minimum lease payments is $263,716 ($100,000 x 2.4869) + ($20,000 x...If you want to shrink a full essay, order it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay