Qustion3 Delivery Vehicles On 01 March 2017 (commencement date), Granny Limited purchased four delivery vehicles in terms of a single lease contract. The fair value of each vehicle was R422 500 on this date. All of these vehicles were available for use as intended by management immediately. The lease payments payable annually in arrears amount to R 675 990 each. The first such payment is payable on 28 February 2018. The lease terminates on 28 February 2020. There is an option to acquire ownership of the delivery vehicles at the end of the lease term and if this option is exercised, R1 per vehicle will need to be paid to the lessor. On 28 February 2020 Granny Limited will pay an additional amount of R25000 per vehicle to the lessor together with the last payment. Granny Limited incurred initial direct costs of R15 000 related to the lease. The lessor also incurred initial direct costs but Granny Limited does not have access to this information. Granny Limited's incremental borrowing rate is 12.5% per year. At the inception of the lease there was no reasonable certainty that Granny Limited would exercise the option to acquire ownership of the delivery vehicles at the end of lease term. The useful life of each delivery vehicle is estimated to be eight years at the inception of the lease. Granny Limited has a February year end. Required: Prepare journal entries that Granny limited would pass in terms of IFRS16 for the entire lease period.
Qustion3 Delivery Vehicles On 01 March 2017 (commencement date), Granny Limited purchased four delivery vehicles in terms of a single lease contract. The fair value of each vehicle was R422 500 on this date. All of these vehicles were available for use as intended by management immediately. The lease payments payable annually in arrears amount to R 675 990 each. The first such payment is payable on 28 February 2018. The lease terminates on 28 February 2020. There is an option to acquire ownership of the delivery vehicles at the end of the lease term and if this option is exercised, R1 per vehicle will need to be paid to the lessor. On 28 February 2020 Granny Limited will pay an additional amount of R25000 per vehicle to the lessor together with the last payment. Granny Limited incurred initial direct costs of R15 000 related to the lease. The lessor also incurred initial direct costs but Granny Limited does not have access to this information. Granny Limited's incremental borrowing rate is 12.5% per year. At the inception of the lease there was no reasonable certainty that Granny Limited would exercise the option to acquire ownership of the delivery vehicles at the end of lease term. The useful life of each delivery vehicle is estimated to be eight years at the inception of the lease. Granny Limited has a February year end. Required: Prepare journal entries that Granny limited would pass in terms of IFRS16 for the entire lease period.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Qustion3 Delivery Vehicles On 01 March 2017 (commencement date), Granny Limited purchased four delivery vehicles
in terms of a single lease contract. The fair value of each vehicle was R422 500 on this date. All of these vehicles were
available for use as intended by management immediately. The lease payments payable annually in arrears amount to R
675 990 each. The first such payment is payable on 28 February 2018. The lease terminates on 28 February 2020.
There is an option to acquire ownership of the delivery vehicles at the end of the lease term and if this option is
exercised, R1 per vehicle will need to be paid to the lessor. On 28 February 2020 Granny Limited will pay an additional
amount of R25000 per vehicle to the lessor together with the last payment. Granny Limited incurred initial direct costs of
R15 000 related to the lease. The lessor also incurred initial direct costs but Granny Limited does not have access to this
information. Granny Limited's incremental borrowing rate is 12.5% per year. At the inception of the lease there was no
reasonable certainty that Granny Limited would exercise the option to acquire ownership of the delivery vehicles at the
end of lease term. The useful life of each delivery vehicle is estimated to be eight years at the inception of the lease.
Granny Limited has a February year end. Required: Prepare journal entries that Granny limited would pass in terms of
IFRS16 for the entire lease period.
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