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QUESTION $2($LEASE ACCOUNTING$-$ LESSEE$)($IFRS$16][40$ MARKS$]$

Eagle Limited has a factory that is situated away from established commuter routes and provides bus transport services for its employees from the city centre to the factory.

Eagle Limited entered into a contract with BigFin Limited for the lease of the bus. The model and size of the bus is stated in the contract and BigFin Limited does not have substitution rights.

The commencement date of the lease is April $2015.$ The lease agreement is for period of $4$ years and requires $4$ lease payments in advance of R$220000.$ The first payment is due on $1$ April $2015$ and remaining $3$ payments on $1$ April $2016,1$ April $2017$ and $1$ April $2018.$

The contract stipulates that a residual guaranteed value of R$160000.$ At the inception of the lease, Eagle Limited expects that the fair value of the bus at the end of the lease term will be R$85000.$ The estimated useful life of the bus is $6$ years.

Eagle Limited's incremental borrowing rate is $7\%.$ The following value table is provided:

Present Value of annuity in advance at $7\%,=3\mathrm{.}62431$

Present Value of in four years at $7\%,=0\mathrm{.}76289$

The financial year end of Eagle Limited is $31$ March of every financial year.

Required

a$)$ Calculate the lease liability and right to use of the bus

$[5]$

b$)$ Prepare a lease amortisation schedule at the inception of the lease $[15]$

c$)$ Prepare journal entries in the accounting records of Eagle Limited for the year ended $31$ March $2016($the first year of the contract and $31$ March $2019($the last year of the contract.$)$

d$)$ Prepare an extract from the statement of financial position of Lerato Limited as at $31$ March $2016$ in accordance with International Financial Reporting Standards.

$[10]$

Round off all your answers to the nearest rand.

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