IAS 17 Question 2

QUESTION 2: IAS 17 LEASES

On 1 January 2015, Finley entered into an agreement to lease a boat. The fair value of the boat
was $36,000 and the term of the lease was four years. Annual lease payments of $10,000 are
payable in advance. The interest rate implicit in the lease is 7.5%. Finley is responsible for insuring
and maintaining the boat throughout the term of the lease.

Required:
Show how this lease would be presented in the statement of profit or loss of Finley for the year
ended 31 December 2015 and the statement of financial position as at that date. Detailed
disclosure notes are not required.

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IAS 17 Question 2

ANSWER – QUESTION 2: IAS 17 LEASES

Finley’s Statement of Comprehensive Income for the year ended 31 December 2015 $
Depreciation $ 36,000 / 4 years 9,000
Interest expense W1 1,950

Finley’s Statement of financial position as at 31 December 2015 $

Non-current assets
PPE under finance lease 36,000
Less: Accumulated depreciation (9,000)
27,000
Non-current liabilities
Finance lease obligation W1 17,950

Current liabilities
Finance lease obligation W1 8,050
Interest payable W1 1,950

Working 1 – Finance Lease Schedule (Advance Payments)

Balance at Rental Principal Interest @ 7.5%
Time Balance at end $
beginning $ $ element $ $
01-01-15 36,000 10,000 10,000 26,000 1,950
01-01-16 26,000 10,000 8,050 17,950 1,346

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