Finance leases in the lessor”s financial statements
On Jan 01, 01 entity E acquires a machine which it leases to entity F starting the same date. The lease term, the economic life (IAS 17.4), and the useful life (IAS 17.4) of the machine are three years. At the end of each year, E receives a minimum lease payment of CU 1. On Jan 01, 01, the fair value of the machine and the lessor”s costs of purchase are identical and amount to CU 2.4.
Required
Prepare any necessary entries in E”s financial statements as at Dec 31 for the years 01 and 02.