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What is the approximate amount of lease expenses

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Question - Samsing Plc. signed a lease contract for an office building on 31st December 2016. The contract is for 3 years. The rent paid at the end of each year of the lease (i.e., on 31 December 2017, 2018 and 2019) is £10,000. The leverage ratio of Samsing, immediately before signing the lease was 0.5. What is the effect of signing the lease on Samsing's leverage ratio?

Assume that, if the lease is treated as a capital lease, the lease asset is depreciated using straight-line depreciation and a useful life of 3 years. Further assume an interest rate of 10%.

What is the approximate amount of lease expenses that Samsing will recognize in 2018?

Reference no: EM133066370

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