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ABC Ltd has entered into an agreement to lease an item of equipment that produces teddy bears. The terms of the lease are as follows:
ABC Ltd has entered into an agreement to lease an item of equipment that produces teddy bears. The terms of the lease are as follows: Date of entering lease: 1 July 2023. Duration of lease: 10 years. Life of leased asset: 10 years. There is no residual value. Lease payments: $5000 at lease inception, $5500 on 30 June each year (that is, 10 payments). Included within the lease payments are executory costs of $500. Fair value of the machine at lease inception: $27 470. Required: Determine the interest rate implicit in the lease.
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