Hardy plc prepares financial statements to 31 March each year. On 1 October 2019 it leased machinery from Hirer on the following terms: (i) a lease rental of £50,000 is payable half-yearly in arrears for five years. (ii) the rate of interest implicit in the lease is reliably computed at 4% per half-year (iii) on completion of the primary period Hardy has an option to lease the asset for a further two years at a rental of £25,000, payable half-yearly in arrears. At the start of the lease it was considered unlikely that Hardy would exercise this option. (iv) the estimated useful economic life of the machinery at the inception of the lease was twelve years Required: 1/ Compute the carrying value of the ‘right of use asset’ in the statement of financial position of Hardy at 31 March 2020 and 31 March 2021. 2/ Compute the finance cost of Hardy for the years ended 31 March 2020 and 31 March 2021. 3/ Compute the lease liability that will be included in the statement of financial position of Hardy at 31 March 2020 and 31 March 2021. In both cases show the split into the current and noncurrent portions.
Q1. Please provide proper calculations and workings. Provide the answer in a format easily I can copy in Excel.
Hardy plc prepares financial statements to 31 March each year. On 1 October 2019 it leased machinery from Hirer on the following terms:
(i) a lease rental of £50,000 is payable half-yearly in arrears for five years.
(ii) the rate of interest implicit in the lease is reliably computed at 4% per half-year
(iii) on completion of the primary period Hardy has an option to lease the asset for a further two years at a rental of £25,000, payable half-yearly in arrears. At the start of the lease it was considered unlikely that Hardy would exercise this option.
(iv) the estimated useful economic life of the machinery at the inception of the lease was twelve years
Required:
1/ Compute the carrying value of the ‘right of use asset’ in the
2/ Compute the finance cost of Hardy for the years ended 31 March 2020 and 31 March 2021.
3/ Compute the lease liability that will be included in the statement of financial position of Hardy at 31 March 2020 and 31 March 2021. In both cases show the split into the current and noncurrent portions.
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