You are given the following information: 

Determine: 

(a) the interest rate implicit in the lease; 

(b) the finance charge to be allocated in each accounting period using the actuarial method; 

(c) the effect on the lessee’s balance sheet and income statement of this lease transaction.

Transcribed Image Text:

Cost of leased asset Lease term Rental paid every six months in advance Expected residual on disposal at the end of the lease term Lessee's interest in residual proceeds Economic life Inception and commencement date Lessee's financial year-end 200,000 5 years 24,000 20,000 97% 8 years 1 January 2008 31 December