We have lease commitments of €16,000/year over a 4-year period. At the end of the lease period, the asset is deemed to have no value. The interest rate we use in our leases is 5%. We depreciate assets on a straight-line basis. Interest is treated as an operating item in our cash flow statement. Calculate： How this lease will effect the balance sheet, income statement and statement of cash flow, over its 4-year life. Under previous accounting rules, the company would have treated the lease as an operating lease. Show how the lease would have impacted the balance sheet income statement and cash flows using this accounting treatment.
We have lease commitments of €16,000/year over a 4-year period. At the end of the lease period, the asset is deemed to have no value. The interest rate we use in our leases is 5%. We depreciate assets on a straight-line basis. Interest is treated as an operating item in our cash flow statement. Calculate： How this lease will effect the balance sheet, income statement and statement of cash flow, over its 4-year life. Under previous accounting rules, the company would have treated the lease as an operating lease. Show how the lease would have impacted the balance sheet income statement and cash flows using this accounting treatment.
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 1P
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We have lease commitments of €16,000/year over a 4-year period. At the end of the lease period, the asset is deemed to have no value. The interest rate we use in our leases is 5%. We
Calculate：
How this lease will effect the balance sheet, income statement and statement of cash flow, over its 4-year life.
Under previous accounting rules, the company would have treated the lease as an operating lease. Show how the lease would have impacted the balance sheet income statement and
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