South Corp leased an equipment from Ray Finance on 1 January, 2016. The lease was classified as a finance lease. The capitalized cost of the equipment was $2,500,000 with no residual value. The lease term was 8 years, while the equipment useful life was 10 years. The interest expense was $206,900 and $190,350 respectively for the first and second years of the lease contract. The financial year for South Corp ends on 30 September. Assume that South uses the straight line method of depreciation and that the lease contract does not result into transfer of ownership of the equipment. Required: For South Corp: Determine the items (and their values) that would appear on the Income Statement for the year ended 30 September 2017.
South Corp leased an equipment from Ray Finance on 1 January, 2016. The lease was classified as a finance lease. The capitalized cost of the equipment was $2,500,000 with no residual value. The lease term was 8 years, while the equipment useful life was 10 years. The interest expense was $206,900 and $190,350 respectively for the first and second years of the lease contract. The financial year for South Corp ends on 30 September. Assume that South uses the
Required:
For South Corp: Determine the items (and their values) that would appear on the Income Statement for the year ended 30 September 2017.
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