Question - B Ltd entered into a lease agreement with D Ltd for the purpose of leasing an item of plant. The following terms are relevant.
The fair value of the plant was $10,000 and had an estimated useful life of 6 years but ownership was to remain with D Ltd, the lessor, at the end of the lease period.
The lease period was for 5 years commencing 1 January 2004.
The annual lease rentals that were payable on 31 December amounted to $2,571
Required - Show how interest would be allocated over the lease period using the sum actuarial (given an implicit interest rate) method. The implicit interest rate is 9%.