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I am still struggle with leasing issues.Can u please help me.
1.On april 2006 T. Acquires phones for its sales force under two year lease agreement.The terms if the lease require an initial payment of $2000,followed by two payments of $8000 on 31march 2007 and 31 march 2008.Show the transactions for that exampke please.
Please tell me that the title for this post is IFRS 16 Leases and not IAS 16 Property, Plant and Equipment!
You need to calculate the present value of the payments under this lease agreement (and, to do that, you need the rate of interest that is implicit within the lease)
Then:
Dr Asset Account with the present value of the minimum lease payments that you have just calculated (say $15,885)
Cr Lease Obligation Account $15,885Dr Lease Obligation Account $2,000
Cr Cash $2,000 being the amount payable on 1 April, 2006Dr Depreciation Expense Account $7,942 (half of $15,885)
Cr Provision for Depreciation Account $7,942Dr Leased Asset interest Account $1,389 (interest accrued for the first year to 31 March, 2007
Cr Lease Obligation Account $1,389Dr Lease Obligation Account $8,000
Cr Cash $8,000 instalment paid on 31 March, 2007Dr Depreciation Expense Account $7,942 (the other half of $15,885)
Cr Provision for Depreciation Account $7,942Dr Leased Asset interest Account $727 (interest accrued for the second year to 31 March, 2008
Cr Lease Obligation Account $727Dr Lease Obligation Account $8,000
Cr Cash $8,000 instalment paid on 31 March, 2008OK?
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