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Determine the interest rate implicit in the lease

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Reference no: EM132919027

ABC Ltd has entered into an agreement to lease an item of equipment that produces teddy bears. The terms of the lease are as follows:

Date of entering lease: 1 July 2023.
Duration of lease: 10 years.
Life of leased asset: 10 years.
There is no residual value.
Lease payments: $5000 at lease inception, $5500 on 30 June each year (that is, 10 payments).
Included within the lease payments are executory costs of $500.
Fair value of the machine at lease inception: $27 470.

Required:

Problem 1: Determine the interest rate implicit in the lease.

Reference no: EM132919027

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