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Company X with a 31st December year-end entered into a three-year lease for a piece...

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Accounting

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Company X with a 31st December year-end entered into a three-year lease for a piece of equipment on 1st January 2020. Company X paid a deposit of 30,000 on 1st January 2020 to the lessor. There are 3 further lease payments of 30,000 due on 31st December 2020, 31st December 2021,31st December 2022 which give a present value of 77,313 when discounted at 8%. Company X also paid initial direct costs of 687. Company X uses the straight line method for all its assets. The implicit interest rate in the lease is 8%. Compute the following for the year ending 31st December 2020 : (a) the total amount shown in company X's income statement in relation to the lease. (4 marks) (b) the current liability on company X's Statement of Financial Position. (2 marks)

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