Scribd
Upload
15 views3 pages

Class Example (Solution)

The document provides a detailed example of journal entries and disclosures related to a lease obligation for Kgalagadi Breweries (Pty) Ltd for the year ended 28 February 2016. It includes calculations for depreciation, finance costs, and lease payments, as well as an amortization schedule for the lease obligation. The right-of-use machine has a carrying amount of R34,951 and the lease payments are structured over a four-year period with an implicit interest rate of 17.52%.

Uploaded by

queennickiii2
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
15 views3 pages

Class Example (Solution)

The document provides a detailed example of journal entries and disclosures related to a lease obligation for Kgalagadi Breweries (Pty) Ltd for the year ended 28 February 2016. It includes calculations for depreciation, finance costs, and lease payments, as well as an amortization schedule for the lease obligation. The right-of-use machine has a carrying amount of R34,951 and the lease payments are structured over a four-year period with an implicit interest rate of 17.52%.

Uploaded by

queennickiii2
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

CLASS EXAMPLE (SUGGESTED SOLUTION)

a) Journal entries

Debit Credit

1 March 2015

Right-of-use machine (SFP) 39 101


Lease obligation (SFP) 39 101
PMT = -14 400, n=4, i=17.52% PV=?

Right-of-use machine (SFP) 7 500


Bank 7 500

28 February 2016

Depreciation (P/L) 11 650


Accumulated depreciation (SFP) 11 650
(39 101 + 7 500)/4* years
*Shorter of lease term or useful life as ownership is not
transferred

Lease obligation (SFP) 7 549


Finance costs (P/L) 6 851
Lease payment/Bank 14 400
(Refer calc 1)

Lease payments/expense (P/L) 1 225


Pre-paid lease expense (SFP) 275
Bank 1 500
((1 500x2)+(950x2))/4 years = 1 225

b) Disclosure

Kgalagadi Breweries (Pty) Ltd


Notes to the annual financial statements for the year ended 28 February 2016

Property, plant and equipment/Right-of-use assets

Right-of-use
machine
R

Carrying amount at beginning -


Additions 46 601
Depreciation (11 650)
Carrying amount at end 34 951
GCA 46 601
Accumulated depreciation (11 650)
CLASS EXAMPLE (SUGGESTED SOLUTION - CONTINUED)

Lease obligation

Secured
R
Right-of-use machine under a lease contract 31 552
Less: Portion of loan repayable within one year transferred to current liabilities 8 872
______
22 680

The lease contract provides a right-of-use machine with a carrying amount of R34 951 for a period of 4
years. Lease payments of R14 400 is made annually in arrears on 28 February yearly and the implicit
interest rate in the contract is 17.52%.

Lease commitments

Right-of use asset

Minimum Future
lease finance Present
payments cost value
R R R

Due within one year 14 400 5 528 8 872


Due between one and five years 28 800 6 120 22 680
43 200 11 648 31 552

Low-value asset

Minimum
lease payments
R

Due within one year 1 500


Due between one and five years 1 900
3 400

Profit before tax

Profit before tax is shown after the following had been taken into account, inter alia:

Depreciation 11 650
Lease payments (low-value asset) 1 225
Finance cost 7 549
CLASS EXAMPLE (SUGGESTED SOLUTION - CONTINUED)

CALCULATIONS:

C1: Amortisation schedule

Lease pmt Capital Interest Balance


39 101
28/2/2016 14 400 7 549 6 851 31 552
28/2/2017 14 400 8 872 5 528 22 680
28/2/2018 14 400 10 426 3 974 12 254
28/2/2019 14 400 12 254 2 146 -

You might also like