RJ Transport Pty Ltd has a long-term contract with PKR Small Goods Pty Ltd to deliver...

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Finance

RJ Transport Pty Ltd has a long-term contract with PKR SmallGoods Pty Ltd to deliver PKRâ€™s products to supermarkets andwholesalers across Australia. In light of PKRâ€™s expansion plans,the board at SRJ are looking to increase the number of deliverytrucks and refrigerated trailers making up their fleet. One of theideas put forward by the finance manager at SRJ is for the firm tolook at leasing the trucks and trailers rather than purchasingthem. Having never previously leased vehicles, the board at SRJ hasrequested that you write a brief report outlining the benefits toSRJ of leasing the trucks and trailers, as opposed to buying thetrucks and trailers by taking out a loan with their principalbanking partner â€“ Rural Bank. (300 words)

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A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time An operating lease is a rental arrangement under which the lessor provides an asset to a lessee but does not transfer the risks and rewards of ownership of the asset Therefore it does not affect the balance sheet Only the lease rent expense would be reported on the income statement A finance lease on the other hand transfers substantially See Answer

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