8 years QUESTION 1 PART B Cheap Finance Ltd has requested your help in preparing their financial statements as they are unsure of the new requirements of NZ IFRS 16 Leases for lessors. You are provided with the following lease details: Cheap Finance Ltd is the: Lessor Commencement date 1 April 2019 Lease term 7 years Lease classification Finance Lease Upfront payment due on the commencement date $40 000 Fixed payments per annum received 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 IDC incurred by the lessor $0 The interest rate implicit in the lease 8% FV of underlying asset at commencement date ? Economic life of the asset The depreciation method used by the lessor 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 i 8% 5.2064 Interest income SCF classification CFOA Required: (1) Prepare the journal entry for Cheap Finance Ltd at commencement date. Determine the fair value of the underlying asset. (ii) Complete the lessor's table in the space provided. What is the total interest income for this lease? (iii) Prepare financial statements for Cheap Finance Ltd to reflect the effects of the lease for the financial periods ending 31 March 2020, 2022, 2024, and 2026. (iv) Is an additional final joumal entry required at the end of the lease by Cheap Finance Ltd to recognise the transfer of ownership to the lessee? Explain your