Question $1$

Hunt plc entered into a lease agreement on the following terms:

Lease term $5$ years

Rentals annual in advance $31,180$

Useful economic life of leased asset Lease commencement date Lessee$$s financial year end

Interest rate implicit in the lease

Required:

$5$ years $31,1808$ years $1$ Jan $202331$ December $10\%$

$1.$ Prepare a schedule that shows the computation of the interest expense for each period.

$2.$ Give the journal entries for Hunt plc$$s books for the first two years of the lease.

$3.$ Show the T account for the lease liability for the first two years.

$4.$ Show how Hunt plc would account for the above lease in accordance with IFRS $16,$ Leases in the Statement of profit or loss and other comprehensive income and the Statement of financial position for the years ending $31$ December $2023$ and $2024.$

$1$

Question $2$

On January $1,2023,$ Mafi plc entered into a non$-$cancellable agreement whereby Mafi plc would lease a new rocket booster. The terms of the agreement were that Mafi plc would pay five annual payments of $27,500$ in advance. The rocket booster has a useful economic life of $8$ years. Mafi plc$$s incremental borrowing rate is $8\%.$ After the primary period of the lease, it is not reasonably certain that Mafi plc will continue to lease the rocket booster.

Required:

$1.$ Prepare a schedule that shows the computation of the finance cost $($interest expense$)$ for each period.

$2.$ Give the journal entries for Mafi plc$$s books for the first two years of the lease.

$3.$ Show the T account for the lease liability for the years ended $2023$ and $2024.$

$4.$ Show how Mafi plc would account for the above lease in accordance with IFRS $16,$ Leases in the Statement of profit or loss and other comprehensive income and the Statement of financial position for the years ending $31$ December $2023$ and $2024.$