Question

Pizza ltd. leased equipment from Tasty Company under a four-year lease requiring equal annual payments of sh.86, 038, with the first payment due at lease inception. The lease does not transfer ownership, nor is there a bargain purchase option. The equipment has a 4-year useful life and no residual value. If Pizza ltd.’s incremental borrowing rate is 10% and the rate implicit in the lease (which is known by Pizza ltd.) is 8%, what is the amount recorded for the leased asset at the lease inception?

Answer 1

Sh. 300,001.60

Step-by-step explanation:

Note: Missing word has been attached

Particulars Amount

Annual payments 86,038

x PV Annuity due 8%, 10 periods 3.48685

Amount recorded for the leased asset 300,001.60