On 1 January 2015, a company which prepares financial statements to 31 December each year acquires a machine on a finance lease. The fair value of the machine on 1 January 2015 is £280,00 and useful economic life is six years. The lease period is five years and the company is required to make five lease payments of £60,00 each. These payments fall due on 1 Jan each year. Discount rate is 4%. The company uses the sum of digit method in the allocation of finance charge. Identify the finance charge in Income Statement for year end 31 Dec 2015.

On 1 January 2015, a company which prepares financial statements to 31 December each year acquires a machine on a finance lease. The fair value of the machine on 1 January 2015 is £280,00 and useful economic life is six years. The lease period is five years and the company is required to make five lease payments of £60,00 each. These payments fall due on 1 Jan each year. Discount rate is 4%. The company uses the sum of digit method in the allocation of finance charge. Identify the finance charge in Income Statement for year end 31 Dec 2015.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter20: Accounting For Leases

Section: Chapter Questions

Problem 10MC: On August 1, 2019, Kern Company leased a machine to Day Company for a 6-year period requiring...

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