Question 1

ABC Ltd has entered into an agreement to lease an item of equipment that produces teddy bears. The terms of the lease are as follows:

Date of entering lease: 1 July 2023.

Duration of lease: 10 years.

Life of leased asset: 10 years.

There is no residual value.

Lease payments: $5000 at lease inception, $5500 on 30 June each year (that is, 10 payments).

Included within the lease payments are executory costs of $500.

Fair value of the machine at lease inception: $27 470.

Required:

Determine the interest rate implicit in the lease.

Question 2

Discuss and explain If an entity is considering revaluing its exploration and evaluation assets, would the revaluation increase the relevance of the information from the perspective of the readers of the financial statements? Further, provide explanation for capitalising the expenses at evaluation and exploration stage also restoration of a oil extraction project.