<br/>Khomasdap Ltd, a company registered as a vendor for VAT purposes,
leased five passenger vehicles from Finance Ltd on 1 January 2017. The input VAT on passenger vehicles cannot be claimed back. The leasing of the five passenger vehicles is a lease in terms of IFRS 16 Leases.
The conditions of the lease agreement were as follows:
· The cash price of each passenger vehicle is N$43 421, excluding VAT at 15%. The VAT is financed.
· Lease instalments of N$56 100 (total instalment for five passenger vehicles) are made half yearly in arrears (i.e. on 31 December and 30th June), over a period of three years.
· The interest rate implicit in the lease is 19.12358% per annum.
· Khomasdap Ltd will acquire ownership of the vehicles at the end of the lease term at no additional cost.
The company provides for depreciation according to the straight-line method over the useful life of the assets. The useful life of each passenger vehicle is considered to be five years and they have a nil residual value.
The income tax rate is 28%.
The company had a deferred tax liability at 1 July 2017 amounting to N$2 152. There are no items affecting deferred tax other than the above lease agreement.
(a) Present the lease transaction in the statement of financial position for the year ended 30 June 2019.
(b) Disclose the lease transaction in the notes to the financial statements of Khomasdap Ltd for the year ended 30 June 2019.
Please note that the following are required
i. Comparative figures
ii. Notes to the financial statements on the following
a. Profit before tax : Interest is already deducted in the profit before tax
b. Finance costs it is $56,100, which is the lease instalment made half-yearly.
c. Income tax expense : Income tax is 28% of profit before tax
d. Deferred tax - analysis of temporary differences it includes the difference in tax paid and tax liability.
e. Right-of-use asset: It will be recorded for an operating lease.
f. Maturity analysis of future lease payments outstanding at reporting date: Lease's maturity period is 3 years, which will end on 31 December 2019.
g. Total cash flows relating to leases: It is $56,100, which is the lease instalment on 30 June 2019.
iii. All workings must be shown
Your answers must comply with the International Financial Reporting Standards (IFRS). Round all amounts to the nearest N$.