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A transport company decides to lease a bus run a service between two cities owing to the increase in demand for a faster transportation between

A transport company decides to lease a bus run a service between two cities owing to the increase in demand for a faster transportation between the two cities. The purchase price of the bus that this company wants to acquire through a financial lease contract is 40,000 at January 1st 2013. After 3 years the residual value is estimated at 4,000. The company will apply the straight line depreciation method.

During those 3 years you will have to pay the lease company an annual lease of 7,290. The annual interest included in this amount is 2%.

Show the relevant accounts and amounts on the balance sheets at January 1st 2013 and at December 31st 2013.

Show the relevant accounts and amounts on the income statement over 2013.

Show the relevant accounts and amounts on the cash flow statement over 2013.

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