Assignment 2 (Answer all questions) Question i 25 Marks Parta 10 Marks Big Red Apple is a producer of apples. It enters a contract with Freight Ltd, a shipping company for the transport of apples from Windhoek to Blantyre on a specific 18 Ton truck. Freight Ltd does not have substitution rights. Big Red Apple specifies the quantity, grade and capacity of apples to be transported as well as dates of departure and arrival. It is also permitted to use spare capacity to transport produce from neighboring firms Freight Ltd operates and maintains the Track and is responsible for its safe passage. It can restrict the truck from travelling on roads deemed unsafe due to civil wars and piracy and can restrict the carrying of unsuitable cargo Required: Discuss with reference to IFRS 16: Leases whether the arrangement contains a lease 1.1 10 Part b 10 Marks Teach Ltd is a private educational institution. It enters into a contract with Copy Ltd for the lease of 21 printers for a period of 3 years. One of the printers is a high specific printer that can cope with high volume and can email scanned documents to recipients. It has a current retail price of NS2000. The other 20 printers are desk models for use in individual offices and each has a current retail price of NS2000. The make and model of the printer is specified in the contract and although Copy Ltd has substitution rights it is not economically viable to do so. Required: 1.2 Discuss with reference to IFRS 16 Leases how Teach Ltd should account for the 10 lease contract. Part 5 Marks a) Equipment Solutions Ltd (ESL) enters a non-cancellable lease contract with Paul Ltd, a chain of bakeries. The contract requires ESL to lease bakeries to Paul Ltd for a period of 4 years, at an annual rental of NS23 660 in arrears. The fair value of the baking equipment is NS75 000 and it has an estimated useful life of 10years. this type of baking equipment is commonly used by bakeries. The contract has no provision allowing Pau Ltd to purchase the equipment or to extend the lease The interest rate implicit in the lease is 10%. Required: 1.3 5 Discuss in terms of IFRS 16, whether this contract should be classified as an operating lease or a finance lease in the books of ESL Assignment 2 (Answer all questions) Question i 25 Marks Parta 10 Marks Big Red Apple is a producer of apples. It enters a contract with Freight Ltd, a shipping company for the transport of apples from Windhoek to Blantyre on a specific 18 Ton truck. Freight Ltd does not have substitution rights. Big Red Apple specifies the quantity, grade and capacity of apples to be transported as well as dates of departure and arrival. It is also permitted to use spare capacity to transport produce from neighboring firms. Freight Ltd operates and maintains the Truck and is responsible for its safe passage. It can restrict the truck from travelling on roads deemed unsafe due to civil wars and piracy and can restrict the carrying of unsuitable cargo. Required: 1.1 Discuss with reference to IFRS 16, Leases whether the arrangement contains a lease 10 Part b 10 Marks Teach Ltd is a private educational institution. It enters into a contract with Copy Ltd for the lease of 21 printers for a period of 3 years. One of the printers is a high specific printer that can cope with high volume and can email scanned documents to recipients. It has a current retail price of N$20 00. The other 20 printers are desk models for use in individual offices and each has a current retail price of NS2000, The make and model of the printer is specified in the contract and although Copy Ltd has substitution rights it is not economically viable to do so. Required: 1.2 Discuss with reference to IFRS16 Leases how Teach Ltd should account for the lease contract 10 Parte 5 Marks a) Equipment Solutions Ltd (ESL) enters a non-cancellable lease contract with Paul Ltd, a chain of bakeries. The contract requires ESL to lease bakeries to Paul Ltd for a period of 4 years, at an annual rental of NS23 660 in arrears. The fair value of the baking equipment is N$75 000 and it has an estimated useful life of 10years. this type of baking equipment is commonly used by bakeries. The contract has no provision allowing Pau Ltd to purchase the equipment or to extend the lease, The interest rate implicit in the lease is 10%. Required: 1.3 5 Discuss in terms of IFRS 16, whether this contract should be classified as an operating lease or a finance lease in the books of ESL