Exercise 6.

6:
Company A enters into an arrangement with an equipment service provider for the use of
• 1 new printer valued at VND 15 million to use for 1 year. The amount A has to pay for this printer is VND
• 1 used laptop valued at VND 20 million (40 million VND when new) to use for 2 years. The amount A ha
The contract contains leases according to IFRS 16. All payment is in advance. The incremental borrowing r
policy, all leased assets valued at or below 30 million qualify for the low-value lease exemption.
Requires: Prepare journal entries to record the lessee’s transactions at the commencement date and the end

A new computer - low value underlying asset

1. Recognise as an expense
On commencement date
DR Lease expense-P/L 3,000,000
CR Cash 3,000,000

2. Recognise as right-of-use asset

2.1) On commencement date
DR Right of use asset 3,000,000
CR Cash 3,000,000

2.2) At the end of Year 1

DR Lease expense-P/L 3,000,000
CR Right of use asset 3,000,000

A used laptop (valued when new was 40mil-> not low value underlying asset)
1) On commencement date
DR Right of use asset 7,773,585
CR Lease liabilities 3,773,585
CR Cash 4,000,000

2) At the end of Year 1

DR Interest expense 226,415 (=3,773,585 * 6%)
CR Lease liabilities 226,415

3) At the beginning of Year 2

DR Lease liabilities 4,000,000
CR Cash 4,000,000
 for this printer is VND 3 million per year
ears. The amount A has to pay for this printer is VND 4 million per year.
cremental borrowing rate of A is 6% per year. Under the company’s accounting
exemption.
ment date and the end of the year N

Year Lease payment Discount factor Present value

1 4,000,000 1 4,000,000
2 4,000,000 0.9434 3,773,585
7,773,585

(=3,773,585 * 6%)
Exercise 11.2
Phi Thanh Van Cosmetics Co. sells skin care products to customers at $2,000 per set. If customers buy 3 se
application form within 1 week after purchase, she would become VIP and be given a welcome gift that wo
successful registration. The vendor estimates, based on recent experience, that 80% of the customers will co
and receive the free gift. Required: Prepare journal entry at the date of sale of a skin care set.

Dr Cash 6,000 (=2000*3)

Cr Sales Revenue 5,840
Cr Estimated Liability for Free Gift 160 (=200*80%)

- Estimated liability for free gift account is credited with $160 to record the estimated cost of the free gifts
complete the on-line registration within 1 week after purchase. This is a liability because the company has a
customers.
set. If customers buy 3 sets at a time and fill in an on-line
n a welcome gift that worth of $200 sales value after
% of the customers will complete the on-line registration
n care set.

ated cost of the free gifts that will be given to customers who
ecause the company has an obligation to give a free gift to eligible