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4. (a) Leia plc has five operating segments. The following information relates to the year ending 31 December 2022: Segment A Be Ce De Ee External Revenue £000< 21,235 6,795 4,236 1,123 950 Profit/(Loss) £000< 7,654 3,210 (1,245) (956) 145 Assets £000 10,789 3,232 1,145 1,321 459 In addition to external revenue, segment B earned revenue of £1.1 million from sales to the other operating segments.< Requirement: P Identify Leia plc's reportable segments using the information above, supporting your answers with full workings. (b) (i) IFRS 16 Leases provides guidance on the accounting treatment of leases from both the perspective of the lessee and the lessor. Explain what an operating lease is and how this should be accounted for by the lessee.< (ii) Boba Ltd has taken out a lease contract with Fett Ltd to lease an item of machinery. The terms of the lease agreement state that Boba Ltd must make five lease payments, each of £5,000 beginning on 1 January 2022 and annually on the same date thereafter. The interest rate implicit in the lease is 8% per annum. Fett Ltd incurs initial direct costs of £250 for the arrangement of the lease. At the end of the lease term, ownership of the asset will remain with Fett Ltd and at this point, the asset is expected to have come to the end of its useful life and to have a residual value of £2,000. Both companies prepare financial statements to 31 December each year. Explain, showing all your workings, how the lease would be accounted for in the financial statements of Boba Itd

4. (a) Leia plc has five operating segments. The following information relates to the year ending 31 December 2022: Segment A Be Ce De Ee External Revenue £000< 21,235 6,795 4,236 1,123 950 Profit/(Loss) £000< 7,654 3,210 (1,245) (956) 145 Assets £000 10,789 3,232 1,145 1,321 459 In addition to external revenue, segment B earned revenue of £1.1 million from sales to the other operating segments.< Requirement: P Identify Leia plc's reportable segments using the information above, supporting your answers with full workings. (b) (i) IFRS 16 Leases provides guidance on the accounting treatment of leases from both the perspective of the lessee and the lessor. Explain what an operating lease is and how this should be accounted for by the lessee.< (ii) Boba Ltd has taken out a lease contract with Fett Ltd to lease an item of machinery. The terms of the lease agreement state that Boba Ltd must make five lease payments, each of £5,000 beginning on 1 January 2022 and annually on the same date thereafter. The interest rate implicit in the lease is 8% per annum. Fett Ltd incurs initial direct costs of £250 for the arrangement of the lease. At the end of the lease term, ownership of the asset will remain with Fett Ltd and at this point, the asset is expected to have come to the end of its useful life and to have a residual value of £2,000. Both companies prepare financial statements to 31 December each year. Explain, showing all your workings, how the lease would be accounted for in the financial statements of Boba Itd

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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4. (a) Leia plc has five operating segments. The following information relates to the year ending 31 December 2022: Segment A Be се De E External Revenue £000+ 21,235 6,795 4,236 1,123 950 Profit/(Loss) £000↔ 7,654 3,210 (1,245) (956) 145 Assets £000 10,789 3,232 1,145 1,321 2 J 459 In addition to external revenue, segment B earned revenue of £1.1 million from sales to the other operating segments.< Requirement: (b) (i) IFRS 16 Leases provides guidance on the accounting treatment of leases from both the perspective of the lessee and the lessor. Explain what operating lease is and how this should be accounted for by the lessee.< 2 2 Identify Leia plc's reportable segments using the information above, supporting your answers with full workings. (ii) Boba Ltd has taken out a lease contract with Fett Ltd to lease an item of machinery. The terms of the lease agreement state that Boba Ltd must make five lease payments, each of £5,000 beginning on 1 January 2022 and annually on the same date thereafter. The interest rate implicit in the lease is 8% per annum. Fett Ltd incurs initial direct costs of £250 for the arrangement of the lease. At the end of the lease term, ownership of the asset will remain with Fett Ltd and at this point, the asset is expected to have come to the end of its useful life and to have a residual value of £2,000. Both companies prepare financial statements to 31 December each year. Explain, showing all your workings, how the lease would be accounted for in the financial statements of Boba Ltd.<
Transcribed Image Text:4. (a) Leia plc has five operating segments. The following information relates to the year ending 31 December 2022: Segment A Be се De E External Revenue £000+ 21,235 6,795 4,236 1,123 950 Profit/(Loss) £000↔ 7,654 3,210 (1,245) (956) 145 Assets £000 10,789 3,232 1,145 1,321 2 J 459 In addition to external revenue, segment B earned revenue of £1.1 million from sales to the other operating segments.< Requirement: (b) (i) IFRS 16 Leases provides guidance on the accounting treatment of leases from both the perspective of the lessee and the lessor. Explain what operating lease is and how this should be accounted for by the lessee.< 2 2 Identify Leia plc's reportable segments using the information above, supporting your answers with full workings. (ii) Boba Ltd has taken out a lease contract with Fett Ltd to lease an item of machinery. The terms of the lease agreement state that Boba Ltd must make five lease payments, each of £5,000 beginning on 1 January 2022 and annually on the same date thereafter. The interest rate implicit in the lease is 8% per annum. Fett Ltd incurs initial direct costs of £250 for the arrangement of the lease. At the end of the lease term, ownership of the asset will remain with Fett Ltd and at this point, the asset is expected to have come to the end of its useful life and to have a residual value of £2,000. Both companies prepare financial statements to 31 December each year. Explain, showing all your workings, how the lease would be accounted for in the financial statements of Boba Ltd.<
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