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IFRS-CH21-Solution - IFRS Practice Problem Solution CH 21...

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IFRS – Practice Problem Solution – CH. 21 Present value of periodic lease payments* ($102,771 x 7.49236 ** ) $770,000 * * rounded ** present value of an annuity due of $1: n=13, i=11% The lease meets at least one (actually 3 of 4 in this case) criteria for classification as a capital lease. A) January 1, 2009 Cash (given) ...................................................................... 770,000 Airplanes (carrying value) .............................................. 620,000 Deferred gain on sale-leaseback (difference) ................ 150,000 Leased airplane (present value of lease payments) ................... 770,000 Lease payable (present value of lease payments) ............... 770,000 Lease payable ................................................................. 102,771 Cash ............................................................................ 102,771 B) December 31, 2009 Interest expense (11% x [$770,000 - 102,771]) ........................ 73,395 Interest payable .......................................................... 73,395
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Depreciation expense ($770,000 ÷ 15 years*) ..................... 51,333 Accumulated depreciation .......................................... 51,333 Deferred gain on sale-leaseback ($150,000 ÷ 15 years) ....... 10,000 Depreciation expense ................................................. 10,000 * The airplane is depreciated over its remaining useful life rather than the lease term because title transfers to the lessee.
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C) When the leaseback is a finance (capital) lease, the gain is recognized over the useful life of the asset under U.S. GAAP as shown in the previous exercise. But, under
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