8 years QUESTION 1 PART A Heavy Metal Ltd has requested your help in preparing their financial statements as they are unsure of the new requirements of NZ IFRS 16 Leases for lessees. You are provided with the following lease details: Heavy Metal Ltd is the: Lessee Commencement date 1 April 2019 Lease term 7 years Economic life of asset Interest expense SCF classification CFFA IDC incurred by the lessee $4 200 Upfront payment due on the commencement date $40 000 Fixed payments per annum payable at year end $120 000 Extra final payment at end of the lease $40 000 Ownership transfers to the lessee at end of lease Yes Lessee's incremental borrowing rate 8% The depreciation method used by the lessee Straight line The relevant present value discount factors are: Present value of $1 in n periods n-7 0.5835 Present value of an annuity i8% 5.2064 Required: (1) Prepare the journal entry to initially recognise the ROU asset and lease liability, at the commencement date. Complete the lessee's table in the space provided. (ii) Prepare financial statements for Heavy Metal Ltd to reflect the effects of the lease for the financial periods ending 31 March 2020, 2021, 2025, and 2026. (iii) Prepare the final journal entry to derecognise the ROU asset and to recognise the transfer of ownership to the lessee. (iv) Based on the lease details provided for the lessee, how would the lessor have classified the lease based on the guidance in NZ IFRS 16 Leases? Explain your answer. (v) There are two recognition exemptions for the lessee. One is the short-term lease exemption and the other is the low value underlying asset exemption. What does the lessee recognise when it meets the requirements of the two exemptions