IAS 17 Leases - IFRS The company Good bread is one of the leading companies in the production of grain products in Iceland. On January 1, 2014, the company made two lease agreements with the bank regarding the use of a delivery car and a bread-making machine.

The delivery car: This is a 3-year contract. Rent payments are paid in advance at the beginning of the year and amount to ISK 1,000,000 per year. The fair value of such delivery cars is 9.5 million, and such a car will work for 10 years. Delivery cars are generally depreciated by using a linear method.

The production machine: This is a 5-year contract which is insolvent and transfers ownership rights to the lessee at the end of the contract period without payment. Rent payments are paid in advance at the beginning of the year, which amounts to ISK 2250000 per year. Fair value of the machine is 10 million ISK, and the machine is expected to last well over 5 years. Production machines are generally depreciated using a linear method.

a) prepare financial transactions that need to be entered in the book of Good Bread in 2014 due to these leases

b) prepare financial transactions that need to be entered in the book of Good Bread in 2014 due to these leases