Company XYZ wants to acquire a truck. The firm has the choice between (1) Purchase the truck
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Question:
Company XYZ wants to acquire a truck. The firm has the choice between
(1) Purchase the truck using own resources for €351 140.
(2) Lease the truck under the old IAS 17 rule.
(3) Lease the truck under the new IFRS 16 rule.
If the decision is to lease, the following details apply:
*duration 5 years
*lease payment= €85 000 at the end of each year
*Unguaranteed residual value= 50 000
Required:
1. For each of these choices, clearly mention IN DETAIL what the impact is on the financial statements.
2. If the company plans to ask for an additional loan with the bank within the next 2 years, which of these choices seems most attractive to you? Clearly document your answer.
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