On 1 January 20X1, Dynamic entered into a three year lease for a lorry. Lease payments are $10,000 per year for the first two years and $15,000 for the third year. All payments are due at the end of the year. The present value of the lease payments was $31,552, and Dynamic incurred initial direct costs of $3,000. Dynamic's rate of borrowing is 5%. Prepare extracts from Dynamic's financial statements in respect of the lease agreement for the year ended 31 December 20X1.

On 1 January 20X1, Dynamic entered into a three year lease for a lorry. Lease payments are $10,000 per year for the first two years and $15,000 for the third year. All payments are due at the end of the year. The present value of the lease payments was $31,552, and Dynamic incurred initial direct costs of $3,000. Dynamic's rate of borrowing is 5%. Prepare extracts from Dynamic's financial statements in respect of the lease agreement for the year ended 31 December 20X1.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 3P

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