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QUESTION 2 ( LEASE ACCOUNTING - LESSEE ) ( IFRS 1 6 ] [ 4 0 MARKS ] Eagle Limited has a factory that is

QUESTION 2(LEASE ACCOUNTING- LESSEE)(IFRS16][40 MARKS]
Eagle Limited has a factory that is situated away from established commuter routes and provides bus transport services for its employees from the city centre to the factory.
Eagle Limited entered into a contract with BigFin Limited for the lease of the bus. The model and size of the bus is stated in the contract and BigFin Limited does not have substitution rights.
The commencement date of the lease is April 2015. The lease agreement is for period of 4 years and requires 4 lease payments in advance of R220000. The first payment is due on 1 April 2015 and remaining 3 payments on 1 April 2016,1 April 2017 and 1 April 2018.
The contract stipulates that a residual guaranteed value of R160000. At the inception of the lease, Eagle Limited expects that the fair value of the bus at the end of the lease term will be R85000. The estimated useful life of the bus is 6 years.
Eagle Limited's incremental borrowing rate is 7%. The following value table is provided:
Present Value of annuity in advance at 7%,=3.62431
Present Value of in four years at 7%,=0.76289
The financial year end of Eagle Limited is 31 March of every financial year.
Required
a) Calculate the lease liability and right to use of the bus
[5]
b) Prepare a lease amortisation schedule at the inception of the lease [15]
c) Prepare journal entries in the accounting records of Eagle Limited for the year ended 31 March 2016(the first year of the contract and 31 March 2019(the last year of the contract.)
d) Prepare an extract from the statement of financial position of Lerato Limited as at 31 March 2016 in accordance with International Financial Reporting Standards.
[10]
Round off all your answers to the nearest rand.
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