An enterprise operates profitably from a factory that is leased under an operating lease. During the financial year, the enterprise relocated its operations to a new factory. The lease on the old factory continues for the next four years and cannot be cancelled or re-lent to another user. The enterprise recognised the provision for onerous contract for the unavoidable lease payments in accordance with IAS 37 “Provision, Contingent Liabilities and Contingent Assets”. Provision to be recognised for this 4-year onerous contract at end of Year 1 is US$25,935. The provision for onerous contract is not tax deductible and lease rental is deductible upon payment. The YE is 31.12.2009. Determine journal entries.
An enterprise operates profitably from a factory that is leased under an operating lease. During the financial year, the enterprise relocated its operations to a new factory. The lease on the old factory continues for the next four years and cannot be cancelled or re-lent to another user. The enterprise recognised the provision for onerous contract for the unavoidable lease payments in accordance with IAS 37 “Provision, Contingent Liabilities and Contingent Assets”. Provision to be recognised for this 4-year onerous contract at end of Year 1 is US$25,935. The provision for onerous contract is not tax deductible and lease rental is deductible upon payment. The YE is 31.12.2009. Determine journal entries.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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An enterprise operates profitably from a factory that is leased under an operating lease. During the financial year, the enterprise relocated its operations to a new factory. The lease on the old factory continues for the next four years and cannot be cancelled or re-lent to another user. The enterprise recognised the provision for onerous contract for the unavoidable lease payments in accordance with IAS 37 “Provision, Contingent Liabilities and Contingent Assets”. Provision to be recognised for this 4-year onerous contract at end of Year 1 is US$25,935. The provision for onerous contract is not tax deductible and lease rental is deductible upon payment. The YE is 31.12.2009. Determine journal entries.
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