Smarty plc prepares financial statements to 31 March each year. On 1 October 20X7 it...
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Smarty plc prepares financial statements to 31 March each year. On 1 October 20X7 it leased machinery from Hirer on the following terms: i) a lease rental of 50,000 is payable half-yearly for five years ii) the rate of interest implicit in the lease is reliably computed at 4% per half-year iii) on completion of the primary period Smarty has an option to lease the asset for a further two years at a rental of 25,000, payable half-yearly in arrears. At the start of the lease it was considered unlikely that Smarty would exercise this option. iv) The estimated useful economic life of the machinery at the inception of the lease was 12 years a) Compute the carrying value of the right of use asset in the statement of financial position of Smarty at 31 March 20X8 and 31 March 20X9. b) Compute the finance cost of Smarty for the years ended 31 March 20X8 and 31 March 20X9. c) Compute the lease liability that will be included in the statement of financial position of Smarty at 31 March 20X8 and 31 March 20X9. In both cases show the split into the current and non-current portions.
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