ASSIGNMENT 1 (WEIGHTING 15%)
Part 1 (weighting 10%, No word limit)
Auckland Ltd has entered into an agreement to lease a D9 Bulldozer to Albert Ltd. The lease agreement details are as follows:
Length of lease5 years
Commencement date1 July 2010
Annual lease payment, payable 30 June $8,000
each year commencing 30 June 2011
Fair value of the bulldozer at 1 July,2010$34,797
Estimated economic life of the bulldozer8 years
Estimated residual value of the plant at the$2,000
end of its economic life
Residual value at the end of the lease term,
of which 50% is guaranteed by Albert Ltd$7,200
Interest rate implicit in the lease9%
The lease is cancellable, but a penalty equal to 50% of the total lease payments is payable on cancellation. Albert Ltd does not intend to buy the bulldozer at the end of the lease term. Auckland Ltd incurred $1,000 to negotiate and execute the lease agreement. Auckland Ltd purchased the bulldozer for $34,797 just before the inception of the lease. Required
1.State how both companies should classify the lease. Give reasons for your answer. 2.Prepare a schedule of lease payments for Albert Ltd.
3.Prepare a schedule of lease receipts for Auckland Ltd.
4.Prepare journal entries to record the lease transaction for the year ended 30 June 2011 in the record of both companies. 5.Prepare an appropriate note to the financial statements of both companies as at 30 June 2011. NOTE: Show ALL workings.
Source: Adapted from Picker,R., Leo, K., Loftus,J., Clark, K., and Wise, V. (2009). Australian Accounting Standards (2nd ed.). John Wiley and Sons.
Part 2 (weighting 5%, Word limit: 1000)
Critically discuss the proposition that “IAS\AASB 117 does allow creditors to make appropriate risk evaluations of a firms statement of financial position”. References to be made to published journals.
ASSIGNMENT 2 (WEIGHTING 15%, WORD LIMIT:2000)
The IASB took a comprehensive review of...