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Beetle Ltd entered into a contract with Apple Ltd on 1 January 20.17 whereby Apple Ltd will lease a machine for a period of four
Beetle Ltd entered into a contract with Apple Ltd on 1 January 20.17 whereby Apple Ltd will lease a machine for a period of four years. The cash selling price and fair value of the machine was R400 000 on 1 January 20.17 and the instalments amount to R132 000 and are payable annually in arrears. The interest rate implicit in the lease is 12.1104% per year. Ownership of the machine will transfer to Apple Ltd at the end of the lease term at no additional cost. The contract is classified as a lease in terms of IFRS 16 , Leases. The machine has a useful life of five years and it is the company's policy to depreciate the machine over its useful life on the straight-line basis. The company financial year-end is 31 December. REQUIRED: (a) Calculate the value of the right-of-use asset and the corresponding liability for Apple Ltd. (b) Prepare the journals entries in the accounting records of Apple Limited for the year ended 31 December 2017. Your answers must comply with the International Financial Reporting Standards (IFRS). Round all amounts to the nearest Rand
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