FAC3703 ASSIGNMENT 1 SEMESTER 1 OF 2022

FAC3703 ASSIGNMENT 1 – SEMESTER 1 OF
2022
(a) Notes to the Financial Statements of Heavy Machinery Ltd for the year
ended 28 February 2022

1. Profit before tax

Profit before tax is stated after taking the following items into account:

R
Incomes
Revenue 1 376 500
Finance Income 36 746

Expenses
Legal Fees 17 000



2. Net investment in finance leases

2.1. Reconciliation of net investment in finance leases

R
Opening balance -
New leases entered into 1 376 500
Finance income 36 746
Lease instalments received (91 250)
Closing balance 1 321 996


2.2. Maturity analysis of future finance lease instalments receivable at
reporting date

2023 2024 2025 2026
R R R R
Undiscounted lease payments 365 000 365 000 365 000 563 750
( ) ( )
Unearned finance income ( ) (100 708)1 (110 294)2 (79 891)3 (45 862)4
Net investment in lease 264 292 254 706 285 109 517 888

, C1. Unearned Finance Income
1.
( )
2.
( )
3.
( )
4.
( )


Calculations

C1. Step 1: Calculate interest rate implicit in the lease

Inputs



( )


Step 2: Calculate the net investment in the lease using the interest rate
implicit in the lease

R
Gross investment in the lease ( ) 1 750 000
Unearned Finance Income ( ) (373 500)
Net investment in the lease 1 376 500