Exam 10: Leases

Burgess Limited accepts a lease incentive to enter into a 3-year operating lease for a building. The incentive is a cash amount of $5000 received on signing of the lease agreement. The lessee initially records this transaction as follows:

Which of the following is NOT an example of a risk of ownership of an asset?

Nelson Ltd manufactures specialised machinery for both sale and lease. On 1 July 2013, Nelson leased a machine to Poggi Ltd. The machine cost Nelson Ltd $195 000 to manufacture, and its fair value at the inception of the lease was $212 515. The interest rate implicit in the lease is 10%, which is in line with current market rates. Under the terms of the lease, Poggi Ltd has guaranteed $25 000 of the asset's expected residual value of $37 000 at the end of the 5-year lease term. The debit to the sales revenue account in Nelson's books is:

In relation to finance leases, the following information must be disclosed separately in the financial statements of lessors: I - Unearned finance income. II - Contingent rents recognised as income in the period. III - The unguaranteed residual values accruing to the benefit of the lessee. IV - The accumulated allowance for uncollectible minimum lease payments receivable.