A lessee enters into a six-year lease of a building which has a remaining useful life of ten years at 01 Jan 20X9. Lease payments are $50,000 per annum, payable in arrears (at the end of each year). The lessee incurs initial direct costs of $20,000 and receives lease incentives of $4,000. There is no transfer of the asset at the end of the lease and no purchase option. The interest rate implicit in the lease is not immediately determinable but the lessees incremental borrowing rate is 5%.

At the commencement date the lessee incurs the direct costs and receives the lease incentives.

Required

1. What amounts will appear in respect of this lease (non-current asset, non-current liability, current liability) in the statement of financial position for the year ended 31 December 20X9? (5 marks)

2. What amounts (finance charge, depreciation expense assuming straight line depreciation) will appear in respect of this lease in the profit or loss statement for the year ended 31 December 20X9 (2 marks)