Question 6

Tallin plc entered into a lease for a machine on 1^stJuly 20X8. The lease details are as follows:

Length of lease	5 years
Annual payments	2,500 payable in arrears
Present value of lease payments	10,531
Deposit paid 1stJuly 20X8	1,469
Interest rate implicit in the lease	6%
Useful life of the asset	6 years

Requirement

1. Prepare the relevant Statement of profit or loss extract in respect of the above lease for the year ended 30^thJune 20X9. (2 marks)

2. Prepare the Statement of financial position extract as at 30^thJune 20X9 with respect to the lease liability.

You may round to the nearest whole number. Show your workings. (5 marks)

3. Tallin leases its office space. The contract entitles Tallin to the exclusive use of the third floor of an identified building together with shared use of the entrance, lobby and lifts. Explain how Tallin should account for the contract in accordance with IFRS 16 Leases. (2 marks)

4. State ONE of the two exemptions allowed in IFRS 16 that allows a lease to be treated as an operating lease. (1 mark)

(Question 6 total: 10 marks