Study each of the following two independent reporting issues, and answer the questions which follow: Reporting issue A On 1 January 2017, UOM Ltd (which has a calendar year end) provided a loan to its Human Resource director amounting to $20000 at interest rate of 1% per annum. Principal and interest are repayable in 3 equal annual installments on 31 December 2017, 31 December 2018 and 31 December 2019. The market interest rate on similar loans is 5% per annum. Required: Using the provisions of IFRS 9, explain, with supporting calculations, how UOM Ltd should recognize and report this transaction in its 2017 financial statements. Reporting issue B [10 marks] On 1 January 2017 the University of Mauritius enters into a 5-year lease of a building owned by SICOM which has a remaining useful life of 10 years. Annual lease payments amount to $50,000 and are payable on 31 December each year. Initial direct costs (paid on 1 January 2017 ) incurred by the University to enter into the lease contract amount to $20,000. The University has also received on 1 January 2017 incentives from SICOM amounting to $5,000. The fair value of the asset amounts to $358,150. The unguaranteed residual value at the end of 31 December 2021 is $200,000. Required: Using the provisions of IFRS 16, a) Compute the interest rate implicit in the lease (rounded off to the nearest integer) using trial rates of 3% and 7%. [4 marks] IRR=LDR+NPVLDRNPVHDRHDRLDRNPVLDR b) Prepare an extract of the lease amortisation table for calendar years 2017 and 2018. [2 marks] c) Prepare journal entries in the books of the University of Mauritius for the year ended [4 marks] 31 December 2017. END OF QUESTION PAPER Page 6 of 6 Study each of the following two independent reporting issues, and answer the questions which follow: Reporting issue A On 1 January 2017, UOM Ltd (which has a calendar year end) provided a loan to its Human Resource director amounting to $20000 at interest rate of 1% per annum. Principal and interest are repayable in 3 equal annual installments on 31 December 2017, 31 December 2018 and 31 December 2019. The market interest rate on similar loans is 5% per annum. Required: Using the provisions of IFRS 9, explain, with supporting calculations, how UOM Ltd should recognize and report this transaction in its 2017 financial statements. Reporting issue B [10 marks] On 1 January 2017 the University of Mauritius enters into a 5-year lease of a building owned by SICOM which has a remaining useful life of 10 years. Annual lease payments amount to $50,000 and are payable on 31 December each year. Initial direct costs (paid on 1 January 2017 ) incurred by the University to enter into the lease contract amount to $20,000. The University has also received on 1 January 2017 incentives from SICOM amounting to $5,000. The fair value of the asset amounts to $358,150. The unguaranteed residual value at the end of 31 December 2021 is $200,000. Required: Using the provisions of IFRS 16, a) Compute the interest rate implicit in the lease (rounded off to the nearest integer) using trial rates of 3% and 7%. [4 marks] IRR=LDR+NPVLDRNPVHDRHDRLDRNPVLDR b) Prepare an extract of the lease amortisation table for calendar years 2017 and 2018. [2 marks] c) Prepare journal entries in the books of the University of Mauritius for the year ended [4 marks] 31 December 2017. END OF QUESTION PAPER Page 6 of 6