Question
a. You have recently started an internship at an investment fund. Currently, the Warehouse accounts for leases using NZ IAS 17, as opposed to the
a. You have recently started an internship at an investment fund. Currently, the Warehouse accounts for leases using NZ IAS 17, as opposed to the new lease standard NZ IFRS 16. Accordingly, they have disclosed the information below for operating leases (i.e. leases that are not capitalised), which are all for retail buildings. The Warehouse has also recently issued bonds that pay 5.30% interest, but has older bonds that pay 6.0% interest.
Your supervisor has asked you to consider the effect of NZ IFRS 16 on the Warehouses financial statements and thus valuation, by capitalising the operating leases. To do so, first fill in the lease template below. You will need to calculate the opening lease liability as the present value of minimum lease payments. (Hint: You can modify the excel template for the lecture example to calculate this). Remember to justify your choices made for your answer (8 Marks)
Year | Lease Payment | Lease Liab | Interest Part | Principal Part |
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b. Record the journal entries relating to the lease in 2019 (i.e. Year 1) not including the issuance of the lease. The Warehouse depreciates buildings over a 50 year life. (6 Marks)
Account | Debit | Credit |
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Account | Debit | Credit |
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Type in any workings to the journal entries here
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Type in any workings to the table here
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