Anumpa  Ltd  leased  an  item  of  Machinery  from  Imlie  Ltd  for  a  period  of  five  years.  The Machinery has a useful life of 12 years. There is no purchase option available at the end of the lease term.

The monthly rental lease payment is $90,000 over the next five years.

The following are additional details pertaining to the lease agreement: 

Rent in advance                                                    $2,000

Term in years                                                              5

Interest rate implicit                                                 6%

Fair value of leased assets                                 $5,500,000

PV of Lease Payments                                        $4,500,000

Total lease payments                                                 ?

 

Required:

 

a)   Calculate the total lease payments. 

b)   Classify the lease under IAS 17. Provide reasons (show calculations) to support your answer. 

c)   How would the current lease be recognized under IFRS 16?

d)   Prepare a lease schedule and provide journal entries in the books of Anumpa Ltd for the first 3 years of lease agreement.

 

Assume interest expense for the five years are calculated as follows:

Year          Interest Expense

1                   $420,000

2                   $212,000

3                   $188,000

4                    $48,000

5                    $32,000