find the question attached below in a word document and help me work on itit is about lease

WEEK 8 TUTORIAL QUESTIONS LEASES BASED ON LECTURE 7 Due Date: Week 8 (Wednesday, 26 April 2017) PRACTICAL QUESTION (36 marks) The chief operations officer (COO) of Frozen Ltd plans to lease refrigerated trucks from CoolTrucks Ltd. CoolTrucks offers to enter into a non-cancellable lease agreement starting on 30/6/2017. The following are the provisions of the lease agreement: The fair value of the office furniture equipment is $94,907 at 30 June 2017. The present value of the minimum lease payments is: $94,626. The lease term is for 5 years and the economic life of the vehicle is 6 years. The annual lease payments are made in advance with $23,000 due immediately and annual payments of $23,000 on 30 June 2018, 2019, 2020 and 2021. Annual executory costs borne by Frozen Ltd amount to $3,000. The contract specifies that Frozen Ltd will have to guarantee 95% of the residual value of $7,500 at the end of the lease term on 30 June 2022. The estimated residual value at the end of the asset's useful life is $6,000. The COO of Frozen Ltd does not expect that the trucks will be needed after the lease term expires. The interest rate implicit in the lease is 6%. Required: i. The COO asks you to determine whether this agreement is considered to be a lease under AASB 16. ii. Prove that the interest rate implicit in the lease is 6% and explain the purpose of the implicit interest rate to the COO. Prepare a schedule of the lease payments to be made by Frozen Ltd for the duration of the lease. Journalize the transactions for the first year (up until 30 June 2018) to demonstrate to the COO how the financial statements of Frozen are affected by the lease. Discuss the differences in the financial statement effect if the lease was recorded as operation lease under the old standard (AASB 117). iii. iv. (2 marks) (14 marks) (5 marks) (15 marks) Note: Round all workings to whole numbers. Discount factors should be displayed with four decimal places. Pro forma schedules for your answers are provided below. 1 Pro forma schedules. i. The COO asks you to determine whether this agreement is considered to be a lease under AASB 16. (2 marks) Answer: ii. Prove that the interest rate implicit in the lease is: 6% and explain the purpose of the implicit interest rate to the COO. Item Discount factor Workings (14 marks) PV Conclusion: Purpose of the implicit interest rate: 2 iii. Prepare a schedule of the lease payments to be made by Frozen Ltd for the duration of the lease. (5 marks) SCHEDULE OF LEASE PAYMENTS Dates Opening liability Interest @ 6% Lease payment Change in liability* PV of liability at balance date 3 iv. Journalize the transactions for the first year (up until 30 June 2018) to demonstrate to the COO how the financial statements of Frozen are affected by the lease. Discuss the differences in the financial statement effect if the lease was recorded as operation lease. DATE ACCOUNT TITLES AND EXPLANATIONS Dr or Cr DEBIT ($) (15 marks) CREDIT ($) Differential effect of lease classification on financial statements: 4 CRITICAL THINKING Assume that your class team has been assigned to the AASB 16 Transition project in a ASX500 listed company that heavily relies on operating leases at the moment. At present, it does not disclose any lease obligations on its balance sheet (as allowed under AASB 117). Required Using the AREA framework to prepare for the meeting with your class team, identify and discuss the effects of the release of IFRS 16 and subsequently AASB 16 for the company (Analyse & Research). In class, work out a strategy with your team for preparing the company for lease reporting under AASB 16. You may make any assumptions about the company, as you see fit (Evaluate & Answer). ANALYSE (30 - 50 words) Identify the issue and why it matters. Determine what you need to find out. RESEARCH (300 words) Discuss relevant facts and evidence, or issues. EVALUATE & ANSWER (50 - 100 words) Provide your opinion based on your discussion of relevant facts, evidence, or issues. 5