Mpali plc is in business of leasing out machines. On 1 January 2018 Nguzu ple leased a machine from Mpali ple. The following are the terms and conditions under which the machine was leased: 1. Inception of lease 1 January 2018 2. Lease term was for 5 years at K35,061,000 per annum payable in arrears 3. The fair value of the asset was K140,000,000 4. The useful life of the asset was five years The present value of 1,000 per annum, receivable or payable at the end of each year for n years is as follows: Present value interest rates (0) 8% 6% 10% 0.909 0.943 1.833 3 2.673 0.926 1.783 2.577 3.312 3.993 1.736 2.487 3.170 3.791 4 3.465 4.212 Required: a. Calculate the interest implicit rate in the lease. (4 marks) b. Calculate the finance charge for each of the years 2018, 2019, 2020 2021 and 2020 (6 marks) c. Prepare extracts from the financial statements of Nguzu pic for the year ended 31 December 2018, 2019, 2020, 2021 and 2020 (10 marks) Total 20 marks QUESTION 2 Mpali plc is in business of leasing out machines. On 1 January 2018 Nguzu plc leased a machine from Mpali ple. The following are the terms and conditions under which the machine was leased: 1. Inception of lease 1 January 2018 2. Lease term was for 5 years at K35,061,000 per annum payable in arrears 3. The fair value of the asset was K140,000,000 4. The useful life of the asset was five years The present value of 1,000 per annum, receivable or payable at the end of each year for n years is as follows: Present value 10% 0.909 interest rates (0) 6% 8% 0.943 0.926 1.833 1.783 2.673 2.577 3.465 3.312 4.212 3.993 3 1.736 2.487 3.170 3.791 4 Required: a. Calculate the interest implicit rate in the lease. (4 marks) b. Calculate the finance charge for each of the years 2018, 2019, 2020 2021 and 2020 (6 marks) c. Prepare extracts from the financial statements of Nguzu plc for the year ended 31 December 2018, 2019, 2020, 2021 and 2020. (10 marks) Total 20 marks