6. Rankin 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 Determine the interest rate implicit in the lease...

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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16. Rankin 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 Determine the interest rate implicit in the lease.
Transcribed Image Text:16. Rankin 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 Determine the interest rate implicit in the lease.
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