ta Normal No Spacing Heading 1 Heading 2 X-BU3530-1 Question 4 (a) Alpha Limited acquired an item of plant and equipment on a finance lease on 1 January 2018. The terms of the agreement were: Instalments: 6,654 pa for four years payable in arrears Cash price: 20,000 The asset has a useful life of four years with a scrap value of 2,000 at the end of the four years. The interest rate implicit in the lease is 12.5% Required over the full term of the lease. 4 Marks (II) Prepare extracts from the Statement of Profit or Loss and Statement of Financia Position for the year ending 31 December 2018, using the actuarial method to allocate the finance costs over the term of the lease. 6 Marks A lease rental of 20,000 was paid on 1 April 2018. It is the first of five annual payments in advance for the rentalof an item of equipment that has a cash purchase price of 80,000. The auditors have advised that this is a finance lease and have calculated the implicit interest rate in the lease as 12% per annum. Leased assets should be depreciated on a straight-line basis over the life of the lease. Required Using the Actuarial method: ( Show the effect on the Statement of Profit and Loss and Other Comprehensive Income and Statement of Financial Position for 31 March 2019. 6 marks (W) Calculate the interest charge for the remaining years of the lease. 4.marks An important requirement of the IASB's Conceptual Framework for Financial Reporting is that an entity's financial statements should represent faithfully the transactions and events that it has undertaken. Required Explain what is meant by faithful representation and how it makes financial information useful. 5 marks Total 25 marks Please note students are required to answer this question in accordance with the provisions of IAS 17 Leases