6BL. Enterprise Limited is a finance company which deals in lease financing. On January 1, 2016 the company entered into a leasing agreement with Charles Construction Limited to lease a specialized equipment for a period of 8 years, Under the lease agreement, GBL. Enterprise Limited was responsible for the maintenance, insurance and repairs. The cost of the equipment was \( \$ 3.8 \mathrm{~m} \) and the annual rental was \( \$ 700,000 \) payable at the end of each. The estimate economic life of the equipment was 10 years after which it is expected to have a scrap value of \( \$ 150,000 \). The implicit rate of interest is \( 12 \% \) per annum and the fair value of the equipment was \( \$ 4.5 \mathrm{~m} \).

Required: a. Prepare the Journal entries for Charles Construction Limited for 31 December 2016? b. Prepare the Extracts for the Income Statement and the Statement of Financial Position as at December 312017. c. Prepare the Extract for the Income Statement for GBL Enterprise Limited for three years endi 31 December 2018 ? d. Show the disclosure requirements as per IFRS 16?

Past Paper Question On 01 July 2016 Ribbers Plc entered into an agreement to lease a machine that had an estimated life of four years. The lease period is also four years at which point the asset will be returned to the leasing company. Ribbers is required to pay for all maintenance and insurance costs relating to the asset. Annual rentals of $16,000 are payable in advance from 01 July 2016 . The machine is expected to have a nil residual value at the end of its life. The machine had a fair value of $56,000 at the inception of the lease. The lessor inchedes a finance cost of 10% per annum when calculating annual rentals. Required: a. How should the lease be accounted for in the financial statements of Ribbers Plc for the year end 31 March 2017? (10 marks) b. Explain in a step-by-step process, the principles relating to recognition, measurement and presentation of leases IFRS 16. (10 marks), (Total 20 marks)