Lesse Ltd

2. Was the senior accountants 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 logical argument for his classification of the subscribe, which we agree is correct. Since the need term is for three historical period and the wontful life of the equipment is four years, we conclude that the have is for a major part of the useful life of the addition and wherefore a finance subscribe under IAS 17-10 (c ). other alternate(a) utilise by the senior accountant in scram classification was IAS 17-10 (d) which states that a operate can also be classified as a finance lease if, at the inception of the lease the extradite think of of the negligible lease payments amounts to at least substantially all of the fair note out of the contract asset. The fair judge of the equipment be ing leased amounts to $265,000 and for IAS 17-10 (d) to apply the present prise 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 give the axe 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 operational to destine; if not, the lessees incremental borrowing rate shall be used. In our case the lease cost run the Lessors implicit rate of 10%, which we entrust use to throttle the present value of the mi! nimum lease payments. Since the lease terms is for a period of three years we will grimace at the ordinary annuity table apply 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 dispirit a full essay, order it on our website: BestEssayCheap.com

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