leasing and Earnings per share

Question 3
a.)Chikepe Shipping Co. (lessee) leases a standard hydraulic lift from Stoughton Trailers Inc. (the lessor) that will be installed at one of Parker’s loading docks. The lease, signed on January 1, 2020, specifies that Stoughton grants right-of-use of the lift to Chikepe under the following terms:
• The lease agreement is non-cancelable with a term of four years, requiring equal rental payments of $11,182.24 at the beginning of each year of the lease (annuity-due basis).
• The lift has a fair value at commencement of the lease of $40,000, an estimated economic life of four years, and no residual value. The cost of the lift on Stoughton’s books is $30,000.
• The lease contains no renewal options. The lift reverts to Stoughton at the termination of the lease.
• The implicit rate of the lessor is 8 percent and is known by Parker.
Required:
(a.i).Apply the lease classification tests ( 10 marks)
(a.ii )Prepare a Comparative Journal Entries for Lessee and Lessor (15 marks
[25 marks]

b.) On 1 January 2021 the balance of an entity’s deferred tax account is $87 000 (cr). This balance consists of the tax effect of $116 000 (cr) of net taxable temporary differences and the tax effect of $29 000 (dr) of an unused assessed loss. The accounting loss for 2021 (before tax) is $500 000, while the movement in temporary differences for 2021 is $80 000 net deductible temporary differences. There is uncertainty regarding the probability of future taxable profits. Assume a tax rate of 29%.
i)Calculate the current tax for the year ended 2021 ( 6 marks)
ii) Calculate the deferred tax at the end of 2021 (7 marks)
iii)Present a tax reconciliation for the year 2021 (4 marks)
[25 marks