Will upvote answer.

QUESTION 1 PART A Heavy Metal Ltd has requested your help in preparing their financial statements as they are unsure of the new requirements of NZ IFRS 16 Leases for lessees. You are provided with the following lease details: Lessee 1 April 2019 7 years Heavy Metal Ltd is the: Commencement date Lease term Economic life of asset Interest expense SCF classification IDC incurred by the lessee Upfront payment due on the commencement date Fixed payments per annum payable at year end Extra final payment at end of the lease Ownership transfers to the lessee at end of lease Lessee's incremental borrowing rate The depreciation method used by the lessee The relevant present value discount factors are: Present value of $1 in n periods n=7 Present value of an annuity i=8% 8 years CFFA $4 200 $40 000 $120 000 $40 000 Yes 8% Straight line 0.5835 5.2064 Required: (1) Prepare the journal entry to initially recognise the ROU asset and lease liability, at the commencement date. Complete the lessee's table in the space provided. (11) Prepare financial statements for Heavy Metal Ltd to reflect the effects of the lease for the financial periods ending 31 March 2020, 2021, 2025, and 2026. (111) Prepare the final journal entry to derecognise the ROU asset and to recognise the transfer of ownership to the lessee. (iv) Based on the lease details provided for the lessee, how would the lessor have classified the lease based on the guidance in NZ IFRS 16 Leases? Explain your answer. (v) There are two recognition exemptions for the lessee. One is the short-term lease exemp- tion and the other is the low value underlying asset exemption. What does the lessee recog- nise when it meets the requirements of the two exemptions? QUESTION 1 PART A The journal entry to initially recognise the ROU asset: $ Dr $ Cr (i) 1/4/2019 Table for the Lessee Lease Interest Expense Payments 8% Commencement of lease on 1 April 2019 Lease Liability Reduction Lease Liability Balance 31/3/2020 31/3/2021 31/3/2022 31/3/2023 31/3/2024 31/3/2025 31/3/2026 31/3/2026 QUESTION 1 PART A (ii) Heavy Metal Ltd Financial Statements Statement of Financial Position as at: 31 March 2020 31 March 2021 31 March 2025 31 March 2026 Non-current assets: Current liabilities: Non-current liabilities: Statement of Comprehensive Income for the vear ending Por L section: 31 March 2020 31 March 2021 31 March 2025 31 March 2026 OCI section: Statement of Cash Flows for the year ending: 31 March 2020 31 March 2021 31 March 2025 31 March 2026 CFOA: CFFA: QUESTION 1 PART A: (iii)The journal entry to recognise the transfer of ownership: 31/3/2026 $ Dr $ Cr (iv)The lessor would classify the lease as a: Explanation for your answer: (v) What does the lessee recognise when it meets the requirements of the two exemptions