Page 161 - F2 Integrated Workbook STUDENT 2019
P. 161
Leases
Example 6.6
Big Ronnie’s Disco Tours enters into a sale and leaseback arrangement on a
number of smoke machines and loudspeaker systems which results in a
leaseback for 4 years from 1 January 20X7. The initial sale is in accordance
with IFRS 15 Revenue from contracts with customers and proceeds were equal
to the fair value of the asset sold.
Details at 1 January 20X7 are as follows:
$000
Carrying amount of non-current asset 400
Fair value of non-current asset 520
The lease rentals are $100,000 per year in arrears. Big Ronnie’s incremental
borrowing rate is 10%.
Required:
Show the entries required to record the sale and leaseback as at the 1
January 20X7.
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