Total: 25 marks SECTIONc Question 5 Lovett Limited prepares accounts to December 31 each year. On January 1 2013 the company acquired a machine by means of a finance The fair value of the asset on this date was 40,000 and the company was required to lease make six half-yearly lease payments of 7,674 each. The first payment was payable in advance on January 1 2013. The rate of interest implicit in the lease was 6% per half-year. The useful economic life of the asset is 4 years with nil residual value; the company depreciates its machinery on a straight line basis. Lovett Limited has the option to purchase the asset at a very favourable price at the end of the lease term and it is likely that this option will be exercised. Required: In accordance with the provisions of IAS 17: a) Construct a table which clearly shows the finance charges and the lease 10 marks liability over the full term of the lease; b) Show the Statement of Financial Position extracts as at December 31, 201 5 marks Page 8 of 10