An Auto Finance Company (AFC) is doing business since last 20 years and deals in various financial products including finance lease, hire purchase and operating lease. AFC takes postdated cheques from customers in advance and deposits with banks on due dates. AFC enters the realization date of cheques in system on daily basis. Average numbers of daily deposited cheques are 700. Around 10% of deposited cheques gets returned unpaid. The unpaid cheques are deposited next day into bank. The AFC is following IFRS for accounting but its holding company follows US GAAPs for accounting. The company is required to do accounting under both IFRS and US GAAPs for reporting purposes. The company follows the policy to round rental amount to zero decimal places. The rentals are amortized using annuity method. The company books income on daily basis. The AFC has extended a lease facility to a Ltd company, the extracts of which are as under: · Asset cost = 100,000 · Contract terms = 48 months · Annual interest rate = 12% · Re-payment frequency = Quarterly in Arrear · RV = 10,000 · Down payment = 8,000 · Security deposit = 50,000 · Start day of the contract = 15th February, 2013 · Asset useful life = 60 months You are required to: 1. Determine the lease type according to IFRS definitions 2. Calculate periodic lease rentals when lease rental for 10th and 11th quarter is zero 3. Prepare amortization schedules for AFC 4. Work out per day income for the first three months 5. Calculate AFCs monthly income for March 2013 6. Calculate the AFC’s achieved rate of return from the contract 7. Prepare accounting entries for AFC at the time of lease contract signing under IRFS 8. Prepare accounting entries at the time of receipt of first rental 9. The AFC customer has defaulted after paying 2nd rental and now 5th rental is due, customer has requested and AFC agreed to restructure the lease facility to by increasing interest rate 1 % p.a. and recovering the interest overdue and penalty amount. The company charges 20% p.a. penalty for overdue on actual days basis. Please workout the restructured rental amount and the accounting treatment at Restructuring this contract.