Question One $-$ Initial measurement, Advance Installment Payment

Michelle Limited prepares financial statement at ${31}^{th}$ October each year. On $1^{th}$ of November, $2018$ Michelle Limited leased a property on a $10-$year lease agreement with Doras Properties. The annual lease payments were TZS$.2,500,000$ payable in advance and the $1^{st}$ payment being made on $1^{st}$ November, $2018.$ Michelle Limited incurred initial direct costs amounting to TZS$\mathrm{.}500,000$ in arranging the lease and received incentives amounting to TZS$.250,000.$ The annual rate implicit to lease is $10\%.$

Required;

Explain how the lease will be accounted for in the financial statements of Michelle Limited for the year ended ${31}^t$ October, $2019$ and $2020$ in accordance with IFRS $16-$ Leases

Question Two

A plc is a UK listed company with an accounting year end of $31$ January. The entity has entered into a lease for an asset, under the following terms:

$($i$)$ The lease was signed on $1$ February $2018.$

$($ii$)($ii$)$ The length of the lease is $5$ years.

$($iii$)($iii$)$ Direct costs of $$60,000$ were incurred in signing up to the lease.

$($iv$)($iv$)$ Annual payments of $$35,000$ are due at the start of each financial year.

$($v$)($v$)$ The present value of all lease payments is $$159,108$

$($vi$)($vi$)$ The finance cost implicit in the lease is $5\%.$

Required:

Calculate the annual costs of the lease for A plc for all years and prepare extracts of the financial statements for the year ended $31$ January $2019$ to account for the lease. Show all workings.

Question Three $-$ Payment in arrears

Michelle Limited prepares financial statement at ${31}^{st}$ October each year. On $1^{th}$ of November, $2018$ Michelle Limited leased a property on a $10-$year lease agreement with Doras Properties. The annual lease payments were TZS$.2,500,000$ payable in arrears ${31}^{st}$ October of each year during the lease term. Michelle Limited incurred initial direct costs amounting to TZS$.500,000$ in arranging the lease and received incentives amounting to TZS:$250,000.$ The annual rate implicit to lease is $10\%.$

Required;

Explain how the lease will be accounted for in the financial statements of Michelle Limited for the year ended ${31}^{th}$ October, $2019$ and $2020$ in accordance with IFRS $16-$ Leases