Company Y Limited acquires a machine under a finance lease agreement. The machine has a cash price of Frw60,000,000. The terms of the lease are: Deposit Frw9,000,000 followed by three annual payments of Frw21,000,000 per annum in arrears. The implicit rate of interest is 11.35%. Requirement: 1. Make an initial journal entry for the lease 2. By the use of sum of years' digit method, present the extracts of financial statements at the end of year one

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Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.