On 1 January 20X2 Farhad Co hired a machine under a five-year lease. A deposit of $500,000 was payable on the commencement of the lease on 1 January 20X2. A further instalment of $500,000 are payable annually in advance. The interest rate implicit in the lease is 6%. 1. What amount will appear under non-current liabilities in respect of this lease in the statement of financial position of Farhad Co at 31 December 20X4? 2. What will be the depreciation expense for the year ended 31 December 20X5?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On 1 January 20X2 Farhad Co hired a machine under a five-year lease. A deposit of $500,000 was
payable on the commencement of the lease on 1 January 20X2. A further instalment of $500,000 are
payable annually in advance. The interest rate implicit in the lease is 6%.
1.
What amount will appear under non-current liabilities in respect of this lease in the statement
of financial position of Farhad Co at 31 December 20X4?
2.
What will be the depreciation expense for the year ended 31 December 20X5?
Transcribed Image Text:On 1 January 20X2 Farhad Co hired a machine under a five-year lease. A deposit of $500,000 was payable on the commencement of the lease on 1 January 20X2. A further instalment of $500,000 are payable annually in advance. The interest rate implicit in the lease is 6%. 1. What amount will appear under non-current liabilities in respect of this lease in the statement of financial position of Farhad Co at 31 December 20X4? 2. What will be the depreciation expense for the year ended 31 December 20X5?
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