On 1st July 2021, Gandalf sold units with a total sales price of 250,000 units for 200 each to a single large customer Included in the contract was a two year service warranty covering all required repairs during this time The normal selling price of the same merchandise would be 170 per unit without the warranty As of 31st December 2021, Gandalf recognised 44,375,000 of revenue, included in the above accounts On 1st January 2021, Tauriel Ltd entered into a four year lease contract for a new machine with a contract requiring the payment of 12,000,000 per annum in arrears The interest rate implicit in the lease is 5 and Tauriel uses the actuarial method to allocate interest for finance leases Tauriels depreciation policy for these assets requires the straight line method over three years and there is not thought to be a residual value of the asset at the end of this period Tauriel didn't account for this transaction Tauriel Ltd acquired 600,000,000 of the ordinary shares of Gandalf Ltd on 1st January 2015 when the retained earnings of Gandalf Ltd were 176,000,000 Tauriel Ltd acquired 80 of the ordinary shares of Bilbo Ltd on 1st January 2017 when the retained earnings of Bilbo Ltd were 460,000,000 Tauriel use the proportionate share (partial) method of valuing the non controlling interest in Bilbo During the year goods with an original cost of 187,500,000 were sold by Tauriel to Gandalf for 437,500,000 A quarter of these goods are in Gandalfs inventory at the year end During the year, goodwill in both subsidiaries has suffered from an impairment of 20 of their values Dividend payments by Gandalf are 144,000,000 and by Bilbo are 40,000,000 These are included in investment income in the statement of profit and loss for the accounting period ending 31st December 2021 The rest of investment income is dividends received from nongroup companies The Financial Director of Tauriel would like a report on how the four year lease should be accounted for Prepare a note containing the full calculation and explanation of your proposed treatment with reference to International Financial Reporting Standards ( 250 words)

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On 1st July 2021, Gandalf sold units with a total sales price of 250,000 units for 200 each to a single large customer. Included in

On 1st July 2021, Gandalf sold units with a total sales price of 250,000 units for 200 each to a single large customer. Included in the contract was a two-year service warranty covering all required repairs during this time. The normal selling price of the same merchandise would be 170 per unit without the warranty. As of 31st December 2021, Gandalf recognised 44,375,000 of revenue, included in the above accounts.
On 1st January 2021, Tauriel Ltd entered into a four-year lease contract for a new machine with a contract requiring the payment of 12,000,000 per annum in arrears. The interest rate implicit in the lease is 5% and Tauriel uses the actuarial method to allocate interest for finance leases. Tauriels depreciation policy for these assets requires the straight-line method over three years and there is not thought to be a residual value of the asset at the end of this period. Tauriel didn't account for this transaction.
Tauriel Ltd acquired 600,000,000 of the ordinary shares of Gandalf Ltd on 1st January 2015 when the retained earnings of Gandalf Ltd were 176,000,000.
Tauriel Ltd acquired 80% of the ordinary shares of Bilbo Ltd on 1st January 2017 when the retained earnings of Bilbo Ltd were 460,000,000. Tauriel use the proportionate share (partial) method of valuing the non-controlling interest in Bilbo.
During the year goods with an original cost of 187,500,000 were sold by Tauriel to Gandalf for 437,500,000. A quarter of these goods are in Gandalfs inventory at the year end.
During the year, goodwill in both subsidiaries has suffered from an impairment of 20% of their values.
Dividend payments by Gandalf are 144,000,000 and by Bilbo are 40,000,000. These are included in investment income in the statement of profit and loss for the accounting period ending 31st December 2021. The rest of investment income is dividends received from nongroup companies.

The Financial Director of Tauriel would like a report on how the four-year lease should be accounted for. Prepare a note containing the full calculation and explanation of your proposed treatment with reference to International Financial Reporting Standards.( 250 words)