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How the liability to the lessor should be represented

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Reference no: EM133171245

Question - On July 1, 2019, Granpa Ltd entered into a finance lease to acquire a machine. The cash price of the machine would have been kshs 1,320,000. The lease agreement specified that the company would make four lease payments, each of kshs 453,030, on June 30, 2020, 2021, 2022 and 2023. The interest rate implicit in the lease was 14% per annum. Granpa Ltd prepares accounts to June 30, each year. Required: Using the actuarial method to allocate finance charges over the lease period, calculate the finance charge which should be shown as an expense in the company's financial statements for each of the years to June 30, 2020, 2021, 2022, 2023. Also show how the liability to the lessor should be represented in the statement of financial position of Granpa Ltd on June 30, 2020.

Reference no: EM133171245

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