Initial recognition Finance lease recognition

Chapter 16 – Leases Page 220 11. The Senior Company sold an item of plant and machinery on 1 January 20X7 for CU125,000, its fair value, when its carrying amount was CU100,000. Senior leased the item back on that date for 5 years, the items remaining useful life. Lease payments are CU35,000 on 1 January each year. Which of the following statements isare true, according to IAS17 Leases? 1 The profit on disposal recognised in profit or loss on 1 January 20X7 is CU25,000. 2 The total finance charge to be recognised in profit or loss over the lease term is CU75,000. A Statement 1 only B Statement 2 only C Statement 1 and statement 2 D Neither statement 12. The Caspian Company leased a warehouse with adjoining land for a period of 15 years. The fair values of the leasehold interests in the land and of the warehouse are CU502,000 and CU251,000 respectively. The land has an indefinite economic life whereas the warehouse has a useful life of 15 years. Title to the land is not expected to pass at the end of the lease. Under IAS17 Leases, at what amount should the assets in relation to finance leases be recognised in the financial statements of Caspian? A Nil B CU753,000 C CU502,000 D CU251,000 13. The Maconie Company is a car dealer. On 1 January 20X7 it entered into a finance lease with a customer under which the customer would pay CU20,000 on 1 January each year for 5 years, commencing in 20X7. The car cost Maconie CU60,000 and its normal cash selling price was CU75,000. Maconie paid legal fees of CU2,000 to a law firm in connection with the arrangement of the lease. Ignoring finance income, what net amount should Maconie recognise in profit or loss in the year ended 31 December 20X7, according to IAS17 Leases? A Net income of CU15,000 B Nil C Net expense of CU2,000 D Net income of CU13,000 Chapter 16 – Leases Page 221 14. On 1 January 20X8 The Hammond Company leased a van with a fair value of CU37,000 under a finance lease. The lease term is 6 years, and the present value of the minimum lease payments is CU35,520. The useful life of the van to the business was estimated at 7 years with no final residual value. The company operates a policy of straight line depreciation. Under IAS17 Leases, what is the depreciation charge on the van in 20X8? A CU5,074 B CU5,286 C CU5,920 D CU6,167