INTERNATIONAL ACCOUNTING LL W/CONNECT
5th Edition
ISBN: 9781264100293
Author: Doupnik
Publisher: MCG
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Chapter 5, Problem 39EP
On January 1, Year 1, Autonomous Systems Ltd. (ASL) signed a contract to lease computer equipment from Lenovo for three years. The lease agreement requires ASL to pay $30,000 at the end of each year of the lease. The company’s borrowing rate is 6 percent. Under U.S. GAAP, the lease would be classified as operating. However, ASL is based in Singapore and will account for the lease using IFRS 16.
Required:
- a. Compute the value of the lease liability that ASL will record under IFRS 16 on January 1, Year 1.
- b. In each year of the lease, ASL will record
depreciation expense on the leasehold asset and interest expense on the lease obligation. Compute the amount of the two expenses in the lease’s first year. - c. ASL is partially backed by a U.S. venture capital fund that would like to know how the lease would be accounted for under U.S. GAAP. How much expense would ASL recognize for the lease if it were a U.S. company and how does this amount differ from the total lease expense recognized under IFRS?
- d. How will the lease affect operating cash flow and how would it affect operating cash flow under U.S. GAAP? Assume that ASL classifies interest paid as a financing flow in its statement of cash flows.
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On January 1, Year 1, Autonomous Systems Ltd. (ASL) signed a contract to lease computer equipment from Lenovo for three years. The lease agreement requires ASL to pay $30,000 at the end of each year of the lease. The company's borrowing rate is 6%. Under U.S. GAAP, the lease would be classified as operating. However, ASL is based in Singapore and will account for the lease using IFRS.
How much higher (or lower) are ASL's expenses related to this lease in Year 1 as accounted for under IFRS compared to how much expense would be recorded related to this lease in Year 1 under U.S. GAAP? Use a negative sign to denote that IFRS expenses are a lower amount, if needed.
On January 1, year 1, Cenron Systems Ltd. (CSL) assigned a contract to lease computer equipment from Dell for three years. The lease agreement requires CSL to pay $45,000 at the end of each year of the lease. The company´s borrowing rate is 6.5%. Under U.S. GAAP, the lease would be classified as operating. However, CSL is based in Singapore and will account for the lease using IFRS 16.
a) Compute the value of the lease liability that CSL will record under IFRS 16 on January 1, Year 1:
b) In each year of the lease, CSL will record depreciation expense on the leasehold asset and interest expense on the lease obligation. Compute the amount of the two expenses in the lease´s first year:
c) CSL is partially backed by U.S. venture capital fund that would like to know how the lease would be accounted for under U.S. GAAP. How much expense would CSL recognize for the lease if it were a U.S. company during the first year?:
please explain!
On June 30, 2016, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $562,907 over a three-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2016. Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate IC used to calculate lease payment amounts. IC purchased the warehouse from Builders, Inc. at a cost of $3 million. Required: 1. What amounts related to the lease would IC report in its balance sheet at December 31, 2016 (ignore taxes)? 2. What amounts related to the lease would IC report in its income statement for the year ended December 31, 2016 (ignore taxes)?
Chapter 5 Solutions
INTERNATIONAL ACCOUNTING LL W/CONNECT
Ch. 5 - Prob. 1QCh. 5 - Prob. 2QCh. 5 - 3. What is a constructive obligation?
Ch. 5 - Prob. 4QCh. 5 - Prob. 5QCh. 5 - Prob. 6QCh. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 10Q
Ch. 5 - 11. What are the rules related to the recognition...Ch. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - What are the five steps that entities take to...Ch. 5 - Prob. 15QCh. 5 - Prob. 16QCh. 5 - Prob. 17QCh. 5 - What is breakage revenue?Ch. 5 - What are the three categories of financial assets...Ch. 5 - Prob. 20QCh. 5 - Prob. 21QCh. 5 - What is the primary difference between how IFRS...Ch. 5 - Prob. 23QCh. 5 - Prob. 24QCh. 5 - Prob. 25QCh. 5 - Prob. 26QCh. 5 - Prob. 27QCh. 5 - A cement manufacturer has cement plants around the...Ch. 5 - Prob. 29QCh. 5 - How much revenue must be generated by a companys...Ch. 5 - How is a major customer defined?Ch. 5 - 1. Halifax Corporation has a December 31 fiscal...Ch. 5 - 2. Bull Arm Company has the following items at...Ch. 5 - 3. Melbourne Inc. became involved in a tax dispute...Ch. 5 - Prob. 4EPCh. 5 - Prob. 5EPCh. 5 - Prob. 6EPCh. 5 - Prob. 7EPCh. 5 - 8. Sandoval Company operates in a country in which...Ch. 5 - Which of the following is a criterion that must be...Ch. 5 - Prob. 10EPCh. 5 - Siam Financial Corp. (SFC) actively trades bonds...Ch. 5 - A 3 million loan paying annual interest at a 5...Ch. 5 - Monterrey Properties enters into a 3-year lease...Ch. 5 - 10. An entity must adjust its financial statements...Ch. 5 - Prob. 15EPCh. 5 - Prob. 16EPCh. 5 - Prob. 17EPCh. 5 - Prob. 18EPCh. 5 - Prob. 19EPCh. 5 - Prob. 20EPCh. 5 - Prob. 21EPCh. 5 - Prob. 22EPCh. 5 - Prob. 23EPCh. 5 - Prob. 24EPCh. 5 - Prob. 25EPCh. 5 - Prob. 26EPCh. 5 - Prob. 27EPCh. 5 - Prob. 28EPCh. 5 - Prob. 29EPCh. 5 - Prob. 30EPCh. 5 - Prob. 33EPCh. 5 - Prob. 34EPCh. 5 - Prob. 35EPCh. 5 - Prob. 36EPCh. 5 - Prob. 37EPCh. 5 - Prob. 38EPCh. 5 - On January 1, Year 1, Autonomous Systems Ltd....Ch. 5 - Prob. 40EPCh. 5 - Prob. 41EPCh. 5 - Prob. 42EP
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