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Amounts that Cavendish Ltd would recognize at the commencement of the lease

1. What are the minimum lease payments in this lease agreement? 4 marks


2. If this lease agreement was classified as a finance lease what does AASB 117 Leases require the lessee (Cavendish Ltd) and the lessor (Froom Rentals Ltd) to do (i.e. which financial elements should be recognized) at the commencement of the lease? Also discuss at which value these financial elements should be recognized. 12 marks


3. Over what time period should Cavendish Ltd depreciate the item of plant equipment? What residual value, if any, should it be depreciated to? 2 marks


4. Apply the requirements of AASB 117 Leases to determine whether Cavendish Ltd would classify this lease agreement as either an operating lease or as a finance lease. Justify your answer. 3 marks


5. Determine the amounts that Cavendish Ltd would recognise at the commencement of the lease and prepare the lease payments schedule.

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