On 1 January 2023, Glassmere Ltd (which prepares accounts to 31 December) enters into a lease for
Question:
On 1 January 2023, Glassmere Ltd (which prepares accounts to 31 December) enters into a lease for the use of an asset. Details of the lease agreement are as follows:Glassmere Ltd will obtain legal ownership of the asset at the end of the lease term. The company calculates depreciation on the straight-line basis.Calculate the finance charge and the depreciation charge which should be shown in the company's financial statements for each of the years to 31 December 2023, 2024, 2025, 2026 and 2027. Also calculate the liability to the lessor at the end of each year and show how this should be split between current liabilities and non-current liabilities.
Lease term Initial direct costs borne by Glassmere Ltd Payments due annually in advance Useful life of underlying asset (for Glassmere Ltd) Residual value at end of useful life Rate of interest implicit in lease 5 years £500 £6,595 each 7 years £3,000 10% per annum
Step by Step Answer:
The initial lease liability is 6595 x 111 111 2 111 3 111 4 20905 The finance charge for ...View the full answer
International Financial Reporting a practical guide
ISBN: 9781292439426
8th Edition
Authors: Alan Melville
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