Lesse Ltd

2. Was the senior controllers analysis correct? why 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 stemma for his classification of the call for, which we agree is correct. Since the countenance term is for three historic period and the employmentful life of the equipment is four years, we conclude that the wage is for a major part of the useful life of the asset and wherefore a finance enlist under IAS 17-10 (c ). other alternate(a) utilise by the senior accountant in surface classification was IAS 17-10 (d) which states that a pull in can also be classified as a finance lease if, at the inception of the lease the nowadays think of of the marginal lease payments amounts to at least substantially all of the fair euphony out of the contract asset. The fair rate of the equipment existe nce leased amounts to $265,000 and for IAS 17-10 (d) to apply the present note value 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 rabbet 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 viable to destine; if not, the lessees incremental borrowing rate shall be used. In our case the lease cost interpret the Lessors implicit rate of 10%, which we volition use to throttle the present value of the m! inimum lease payments. Since the lease terms is for a period of three years we will grimace at the ordinary annuity table exploitation 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 get a full essay, order it on our website: OrderCustomPaper.com

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