In an effort to improve the academic quality, Mulungushi University recently built and commissioned the ICT center. The University tender committee where you are a member is has concluded the lease arrangement with Computer Express Zambia limited for the use of a standard computer system. The lease is non-cancelable, and Mulungushi University will not receive title to the computers during or at the end of the lease term. Computer Express will lease the returned computers to other Universities after the lease term. The lease starts on January 1, 2022, with the first rental payment due on January 1, 2022.

Additional information related to the lease and the underlying leased asset is as follows. The Lease term is 3 years while the estimated economic life 5 years with the Unguaranteed Residual value of K18,000 .Yearly rental is K18, 343.50.There is a Purchase option of K18, 000 at end of 3 years, which approximates fair value. Renewal option 1 year at K9, 000; no penalty for non-renewal; standard renewal clause. The Fair value at commencement is K60, 000, while the cost of asset to Computer Express is K48, 000.Lessors implicit rate known by the Mulungushi is 12%.Estimated fair value at end of lease is K18,000.Simmilar assets are depreciated on the straight line basis.

Required

a). Prepare the journal entries for Mulungushi for 2022.(8 marks)

b) Briefly explain the impact of the way this lease has been recorded on the return on assets and debt to total Asset ratios. (5 marks)

C) Briefly explain the impact of the way this lease has been recorded on the cash flow statement(5 marks)

d) Contrast the accounting for leases by the lessee as guided by IAS 17 and the new IFRs 16 and explain the potential impact of the new IFRS 16 on the financial statements of the lessee (7 marks